Stablecoins, Yields, and a $29 Trillion Gamble: Wall Street Braces for Bessent's Big Move

Treasury Secretary Scott Bessent is expected to keep the pace of longer-term debt issuance steady when the department announces its auction plans this Wednesday. After sharp swings in the $29 trillion Treasury market earlier this month, Bessent has signaled a careful approach, focusing on suppressing long-term yields rather than rushing into structural changes. Despite criticizing Janet Yellen's short-term debt tilt during the election, Bessent has maintained guidance for steady note and bond auction sizes, and Wall Street widely anticipates no adjustments for the May-to-July quarter.

One emerging factor drawing attention is the rapid rise of stablecoins, which are increasingly using Treasury bills as backing. JPMorgan JPM estimates that roughly $114 billion of T-bills were tied to stablecoins by the end of last year, with strategists projecting that number could climb quickly. TD Securities believes that if Bessent holds auction sizes steady this week, markets will read it as a sign the Treasury is willing to lean more heavily on bill issuance, rather than pushing larger auctions of longer-dated notes and bonds a move that could ease pressure on 10-year yields without unsettling broader markets.

Looking ahead, JPMorgan's base case is that Treasury (and Bessent) will eventually need to resume auction size increases, potentially by November. However, based on recent comments from Bessent, there is a growing risk that changes could be delayed into 2026. Any early moves to shrink the average maturity of outstanding debt or conduct buybacks could spook the market and drive yields higher, rather than lower. As of late Friday, the 10-year yield was holding near 4.24%, with investors weighing stablecoin growth, fiscal deficits, and the Treasury's next moves in an environment where political dynamics are increasingly shaping bond market behavior.