U.S. Treasury Secretary Steven Mnuchin said he’s unconcerned about the bond market’s ability to absorb rising government debt after his department said it borrowed a record amount for the first quarter.
“It’s a very large, robust market -- it’s the most liquid market in the world, and there is a lot of supply,” he said in a Bloomberg TV interview on Monday. “But I think the market can easily handle it.”
Mnuchin also indicated he is unconcerned about demand for Treasuries, saying “by definition supply and demand will equate” and that there are still plenty of buyers.
The U.S.’s need to issue more Treasuries is expected to grow as the fiscal picture deteriorates. The budget deficit widened to $600 billion halfway through the fiscal year, as spending increased at three times the pace of revenue growth in the October-to-March period, according to Treasury figures released earlier this month.
President Donald Trump’s tax cuts combined with the spending bill approved earlier this year will result in a budget gap of $804 billion this fiscal year, according to the Congressional Budget Office.
The CBO also estimates the gap will blow past $1 trillion by 2020.
In an accompanying statement about the state of the economy, the Treasury said Monday that tax changes are “poised to underpin near-term consumption and investment” and “the stage is set for a pick-up in growth over the near term.”