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Bloomberg's Nicholson on Trump and Treasury (Correct)(Audio) · Bloomberg Intelligence

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  Speaker 1: that's a Bloomberg business flash you're listening to Taking Stock
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  Speaker 1: with Kathleen on Bluebird Radio. The United States is nearly
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  Speaker 1: twenty trillion dollars in debt now that number has almost
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  Speaker 1: doubled under President Barack Obama. Republican contend for the White
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  Speaker 1: House Donald Trump hasn't said anything about the debt that
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  Speaker 1: has swelled during Obama's administration, and he's also said that
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  Speaker 1: it is time to borrow and borrow long term is
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  Speaker 1: for infrastructure projects such as the military, as well as
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  Speaker 1: rebuilding airports and bridges. Jonathan Nicholson are a Capitol Hill
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  Speaker 1: budget reporter for Bloomberg b N, a wholly owned subsidiary
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  Speaker 1: of Bloomberg, the leading source of legal, regulatory and business
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  Speaker 1: information for professionals. Joins us now, Jonathan, tell us your
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  Speaker 1: thoughts on this idea of borrowing big and borrowing long
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  Speaker 1: term as espoused by the Republican contender Donald Trump. Well,
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  Speaker 1: it's it's. Uh, there's kind of two things here at play. Um,
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  Speaker 1: one of which is probably arguably more of a Trumpian
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  Speaker 1: kind of thing, and the other which actually has some
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  Speaker 1: bipartisan support to it. Um. On the bipartisan side, there
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  Speaker 1: actually is some thought running from some economists that as
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  Speaker 1: long as long term, as long as long term rates
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  Speaker 1: are gonna be low, um, why shouldn't the US borrow
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  Speaker 1: um to to make needed investments? Um. Some some economists
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  Speaker 1: has said that it's likely we're gonna have low rates
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  Speaker 1: for for a long time. Uh, so why not go
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  Speaker 1: ahead and trying to fix the fix the hole in
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  Speaker 1: the roof while the fixing is cheap, John, listen to me.
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  Speaker 1: Is is a very important question because the Obama administration
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  Speaker 1: several years ago in the financial crisis, decided that they
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  Speaker 1: thought it was necessary to have aquidity and issue a
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  Speaker 1: lot of short term a lot of treasury bills. They
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  Speaker 1: really shifted the duration and where the government is selling
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  Speaker 1: its its bills and notes and bonds. But when you
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  Speaker 1: have thirty year paper at two and a half percent,
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  Speaker 1: when you have ten year paper at one and a
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  Speaker 1: half percent, that would be like saying, Gee, I'm not
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  Speaker 1: gonna buy a house and take advantage of a very
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  Speaker 1: low mortgage race. I think a lot of people have
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  Speaker 1: scratched their heads and say, why does the Treasury not
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  Speaker 1: look at this and ship and and that's that's what
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  Speaker 1: That's what Trump and his adviser David Maul passed yesterday
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  Speaker 1: on Cspanders start talking about, um, why not lock in
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  Speaker 1: those those those low rates UM. Historically that is kind
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  Speaker 1: of not the way the Treasury has approached debt management UM,
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  Speaker 1: even going back under both the George W. Bush UH
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  Speaker 1: Reuben in the Clinton administration and UH and the Treasury
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  Speaker 1: secretaries under Obama. They're thinking is that you need to
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  Speaker 1: have They're often phrase thing is regular and predictable debt issues.
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  Speaker 1: But as long as the markets know that there always
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  Speaker 1: be some supply of treasury debt and that it will change,
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  Speaker 1: but it will change in relatively predictable ways. UM. That
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  Speaker 1: that will keep overall borrowing costs down by being regular
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  Speaker 1: and predictable rather than fearing, rather than have market participants
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  Speaker 1: worry that the Treasury is trying to time the market
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  Speaker 1: by issuing more debt, you know, or longer term debt
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  Speaker 1: when rates are low, and less when those conditions reverse.
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  Speaker 1: So that's sort of the thinking there, and it's been
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  Speaker 1: ingrained for for quite a long time. Actually, does that
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  Speaker 1: thinking makes sense? Um I there's probably someone who can
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  Speaker 1: do the math um on that UM and say what
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  Speaker 1: the premium is that they're trying to avoid by by
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  Speaker 1: not doing this. Um. I think that it's not like
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  Speaker 1: they don't make any adjustments. Is in my story today
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  Speaker 1: that they're the the weighted average maturity basically the UH
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  Speaker 1: the maturities of the debt, of the debt weighted for
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  Speaker 1: how much is outstanding in each you know, bills, bonds,
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  Speaker 1: and notes UM has increased over the last couple of years.
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  Speaker 1: It's up to about seventy months now, UM, so a
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  Speaker 1: little bit more than about you know, five years and
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  Speaker 1: ten months UM, where is the whereas the historical average
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  Speaker 1: for the last thirty or forty years is like fifty
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  Speaker 1: nine months. So it has crept up a little bit,
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  Speaker 1: but is by no means, you know, anywhere anywhere near
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  Speaker 1: what what what sounds like they're trying to talk about
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  Speaker 1: with the Trump with the Trump people. Well, Jonathan is
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  Speaker 1: part of a team. I know you also follow taxes
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  Speaker 1: in the budget. Do you have any even the thumbnail
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  Speaker 1: figure right or since so report reporting on this, how
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  Speaker 1: much difference it would make if suddenly the Treasury issued
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  Speaker 1: a lot more tangiers and tenure in thirty years over time,
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  Speaker 1: how that would affect our estimate of the budget deficit,
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  Speaker 1: which is such an important issue for this country. Uh No,
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  Speaker 1: no one that I know of has put pen to
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  Speaker 1: paper on that, um and and and and you do
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  Speaker 1: have to remember the here that that given the short
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  Speaker 1: term nature of bills, you know, we're still you know,
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  Speaker 1: you still can get you know, bill build. The sellout rates,
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  Speaker 1: the stop out rates are called, still are so relatively
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  Speaker 1: small now, especially with you know, Brexit and every other
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  Speaker 1: kind of thing that puts the flight to quality to
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  Speaker 1: the uh to the market, that we're still able to
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  Speaker 1: sell build at such a small rate that the you know,
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  Speaker 1: the savings versus you know, the one point five percent
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  Speaker 1: for ten years. You know, it's it's I really would
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  Speaker 1: wouldn't the only hazard guess at this point to be
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  Speaker 1: hofest with you, Well, that's because that's why you worked
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  Speaker 1: for Bloomberg B and A. Jonathan, because I don't guess
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  Speaker 1: you give us the real deal. Well, I don't do
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  Speaker 1: that good of math though, unfortunately, so you know that
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  Speaker 1: that's the downside, I guess, Jonathan Nicholson, Thank you so
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  Speaker 1: very much for joining This is an important and very
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  Speaker 1: interesting story. Bloomberg DNA. That's where he's Capitol Hill Budget Reporter.
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