An article of mine appeared in the online edition of Pensions & Investments the other day. In Did the Treasury undermine the Fed?, I respond to a highly-publicized paper by four Harvard scholars that claimed that the U.S. Treasury sold too much of its debt at the long end, undermining the Fed’s efforts to stimulate the economy by pulling long debt out of the market. I argue that Treasury actually kept out of the Fed’s way by selling mostly short debt. The median maturity of the debt is only three years. I’m concerned that the Harvard paper could influence the Treasury to concentrate even more at the short end, which might exacerbate its (and our) interest rate risk.
This article is a condensed version of my blog post Getting it Wrong on the Treasury and the Fed.