US banking deregulation: One big beautiful selfinterest-inflicted move

The US bond market is a key constraint for Donald Trump and his policies. Given the fiscal path the US has taken, deficits are unlikely to come down any time soon. As a consequence, the US Government is currently spending 18% of its tax income as interest payment.

According to the CBO, this number is expected to reach 22% within the next decade. With the average rate on outstanding debt standing at 3.3% - i.e. substantially below current rates -, it becomes quite clear why Trump is so sensitive to the level of rates and why he pushes the FED so hard to lower rates. Even more as ~ USD 11.6tn of US debt is maturing by the end of next year.

He needs lower rates to keep bond vigilantes at bay and to prevent the market to fully question the sustainability of the fiscal path the US has taken. Thus, a move which allows banks to warehouse more treasuries seems quite obvious. Especially, since the effct could be a yield which falls by tens of basis points as US Treasury Secretary Bessent indicated. Besides the potential direct impact on rates, this increases the volume of treasuries which banks could absorb should (foreign) selling intensifies, turning them into a more effective moat against bond vigilantes.