Trump Remarks on Debt Payments Cause Market Speculation

By Davide Barbuscia
NEW YORK (Reuters)

Bond investors faced uncertainty on Monday following President Donald Trump’s comments about investigating Treasury debt payments for potential fraud. Some interpreted his remarks as a hint at a reduction in future debt issuance.

While speaking to reporters on Air Force One, Trump indicated that officials reviewing wasteful spending had now focused on U.S. debt payments, suggesting that the nation’s $36 trillion debt might be overstated.

Market participants speculated that Trump’s remarks pointed to a potential decrease in the overall debt burden, possibly linked to an overhaul by the Department of Government Efficiency (DOGE), led by billionaire Elon Musk. However, it was deemed unlikely that this would affect upcoming debt payments.

Prashant Bhayani, chief investment officer for Asia at BNP Paribas Wealth Management, remarked, “I would be very surprised if they ever stopped a payment of Treasury bonds to a holder; it would be like shooting yourself in the foot.”

DOGE has already disrupted operations across several federal agencies and raised concerns about privacy and security, especially after a federal judge temporarily prohibited Musk’s team from accessing government payment systems due to data leak risks.

Trump’s comments followed Treasury Secretary Scotty Bessent’s statement in a Bloomberg interview that the U.S. government’s borrowing trajectory was declining. This came after Treasury Department insights that alleviated worries about imminent increases in long-term government debt issuance.

Tony Farren, managing director at Mischler Financial Group, stated, “If you put those comments together with Trump’s comments, I think this is going to be a very positive development for the Treasury market.” However, he emphasized that evidence of lower borrowing requirements needs to reflect in smaller Treasury debt auctions.

The Treasury Department, the White House, and three major credit ratings agencies did not respond to inquiries at that time.

Meanwhile, benchmark 10-year Treasury yields rose slightly on Monday ahead of $125 billion in upcoming U.S. Treasury auctions, testing the market’s demand for government debt. U.S. sovereign credit default swaps (CDS) spreads remained unchanged.

BTIG, a U.S. brokerage firm, interpreted Trump’s comments as the president referencing specific payments rather than the entirety of outstanding U.S. Treasury securities. They emphasized the White House’s awareness of the turmoil that would arise from questioning the validity of any Treasury securities, suggesting that Trump might have been discussing particular budget items.