- The speaker discusses interest rates on the 10-year and 30-year bonds in 2021.
- They correct a tweet that stated the 30-year rate was 70 basis points under the Biden administration.
- The speaker mentions that the Treasury Department suspended 30-year auctions in 2001 and reinstated them 5 years later.
- They argue that the Treasury's statement on the maturity of the debt is incorrect, as it excludes $8 trillion funded overnight in the repo market.
- The speaker questions the market for selling longer-term duration bonds.
- They express concern over increased government spending and lack of offsets in the budget.
- The speaker emphasizes the need to address entitlements and criticizes excessive spending.
- They mention missed opportunities and the low risk-reward of issuing debt at current interest rates.
- The speaker highlights the impact of low rates on mortgage refinancing and maturity of mortgage debt.

Stanley Druckenmiller, Duquesne Family Office chairman and CEO, joins 'Squawk Box' to discuss the state of the U.S. economy, Treasury Secretary Janet Yellen's 'big blunder' of not issuing more long-dated Treasurys when interest rates were low, government spending and the impact on the national debt, market outlook, the Fed's inflation fight, and more. For access to live and exclusive video from CNBC subscribe to CNBC PRO: https://cnb.cx/2NGeIvi 

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Now we're going to get to what you're salivating over, Joe.

So at this point So, 2021, in the second half, interest rates on the 10-year are like 1.1.

On the 30-year, despite having been corrected in a tweet, And I was right to be corrected.

It was not 70 basis points under the Biden administration.

By the way, the tweet that corrected me on the 30-year is incorrect.

It was trading at 166 as a low that period, and it was under 18 plenty of the time.

The tweet that said that Treasury has never managed the maturity of the debt is also historically incorrect.

As most of you probably know, the Treasury Department suspended 30-year auctions in 2001 because term premium was high, the yield curve was steep, and they thought it was a useless use of money, so they were reinstated 5 years later.

In terms of the maturity of the debt, Treasury will have you believe, and the tweet used this, that the maturity of the debt is 72 months.

That conveniently leaves out $8 trillion that is funded overnight in the repo market.

We at Duquesne use the consolidated government debt because we're looking at what the taxpayers are on the hook for.

In fact, when the Fed was making profits, they remitted the money to Treasury.

So why you would leave out, in terms of government debt, $8 trillion.

Under that, the maturity of the debt, which was 63 months pre-COVID, is now 57 months.

So the statement by the Treasury Department and others that the maturity of the debt has increased since pre-COVID is absolutely incorrect.

The question I have, putting aside the Yellen, Mnuchin...

No, my 1 question is, do you believe that there would be a market for selling much longer-term duration bonds?

Either many more 30s or going up to 50s or 100s.

And the reason I ask is that was the implication, I think, of what you were saying.

I made a bunch of calls yesterday, and I know then I started reading all these studies and other things that folks inside the Treasury Department, including under Mnuchin, looked at doing that 50-year.

In fact, I looked and found an interview that Mnuchin had done with me at a deal book thing years ago where he wanted to do it, but then realized or thought that he couldn't do it because he didn't think that there was enough of a market and that it would actually it would it would sort of pervert the rest of the market otherwise?

I think that market would be very challenged in the current environment.

Don't forget, pre-COVID, we were spending 20 percent.

The federal government was 20 percent of GDP in spending.

As outlined in the Wall Street Journal editorial this morning my father told me if you're in the hole stop digging Stan all right So I was actually happy to see when the announcement, the support for Ukraine and Israel, $106 billion.

And I was waiting to hear what the offset was going to be.

And the next thing I knew, 2 days later, there was not only no offset, there was $56 trillion in emergency spending.

It's a priority that maybe should be on the table or not.

But we are spending like drunken sailors, OK?

So do you agree with the House Republican plan, which puts forth spending for Israel, but cuts it in the IRA through funding to the IRS?

Is that an appropriate offset, in your mind?

I'm going to give you some numbers to tell you why it's going to happen no matter what.

Anyway, getting back to the question, and then I really want to leave it.

Because that's something that's in the past.

We missed a once-in-a-century opportunity.

Yesterday, Steve Leesman said, I wanted Treasury to trade like a hedge fund.

I do not want Treasury to be trading and messing around with the maturity of debt.

All I'm saying is in 2021, Janet Yellen and Mnuchin before her, we spent $5 trillion.

The idiots were lined up out there wild to buy treasury debt at 182%, whatever you want to call it, let's not like play gotcha on this 1, okay?

Or 1.1%, with nominal GDP growing at 10%.

Okay, so look, it's not like it took Stan Druckenmiller to figure out that you're at like a 700-year low in interest rates.

Okay, nominal GDP is growing 10% that the risk-reward of issuing debt at 1.1% in the 10-year is off the charts.

80% of American households, 80% refinanced their mortgage.

They lengthened the average maturity of mortgage debt from 3.5 years to 8 years.

As a consequence, it's going to take 5 years for that maturity to go up to get back to like 4 and a half.

So it's just huge in terms of what they say.


Speaker 0: Now we're going to get to what you're salivating over, Joe.

Speaker 1: I'm going to let you do it. You go in the sequence you want. I just – they intro'd it like that. Go ahead.

Speaker 0: So at this point So, 2021, in the second half, interest rates on the 10-year are like 1.1. On the 30-year, despite having been corrected in a tweet, And I was right to be corrected. It was not 70 basis points under the Biden administration. It was, let's use 1, 1.1. That's a more reasonable estimate.

By the way, the tweet that corrected me on the 30-year is incorrect. It was trading at 166 as a low that period, and it was under 18 plenty of the time. The tweet that said that Treasury has never managed the maturity of the debt is also historically incorrect. As most of you probably know, the Treasury Department suspended 30-year auctions in 2001 because term premium was high, the yield curve was steep, and they thought it was a useless use of money, so they were reinstated 5 years later. 1 more thing on this issue.

In terms of the maturity of the debt, Treasury will have you believe, and the tweet used this, that the maturity of the debt is 72 months. That conveniently leaves out $8 trillion that is funded overnight in the repo market. That's the Fed balance sheet.

Speaker 2: How much overnight?

Speaker 0: $8 trillion. That's the Fed balance sheet. We at Duquesne use the consolidated government debt because we're looking at what the taxpayers are on the hook for. In fact, when the Fed was making profits, they remitted the money to Treasury. So why you would leave out, in terms of government debt, $8 trillion.

Under that, the maturity of the debt, which was 63 months pre-COVID, is now 57 months. So the statement by the Treasury Department and others that the maturity of the debt has increased since pre-COVID is absolutely incorrect. All right. That's like... You want something...

You guys can interrupt.

Speaker 1: That's like we created 12 million. It's the same kind of...

Speaker 3: The question I have, putting aside the Yellen, Mnuchin...

Speaker 0: I want to get to his answer, though.

Speaker 3: Whatever. No, my 1 question is, do you believe that there would be a market for selling much longer-term duration bonds? At a price? Either many more 30s or going up to 50s or 100s. And the reason I ask is that was the implication, I think, of what you were saying.

I made a bunch of calls yesterday, and I know then I started reading all these studies and other things that folks inside the Treasury Department, including under Mnuchin, looked at doing that 50-year. In fact, I looked and found an interview that Mnuchin had done with me at a deal book thing years ago where he wanted to do it, but then realized or thought that he couldn't do it because he didn't think that there was enough of a market and that it would actually it would it would sort of pervert the rest of the market otherwise?

Speaker 0: Currently, no. I think that market would be very challenged in the current environment. Don't forget, pre-COVID, we were spending 20 percent. The federal government was 20 percent of GDP in spending. Right.

It's now 25 percent of GDP. As outlined in the Wall Street Journal editorial this morning my father told me if you're in the hole stop digging Stan all right So I was actually happy to see when the announcement, the support for Ukraine and Israel, $106 billion. And I was waiting to hear what the offset was going to be. Was it going to be entitlements? Where were the cuts going to be?

And the next thing I knew, 2 days later, there was not only no offset, there was $56 trillion in emergency spending. I have kids. I have grandkids. Child care is not emergency spending. It's a priority that maybe should be on the table or not.

But we are spending like drunken sailors, OK? So...

Speaker 2: JUDY WOODRUFF, The Washington Post. So do you agree with the House Republican plan, which puts forth spending for Israel, but cuts it in the IRA through funding to the IRS? Is that an appropriate offset, in your mind?

Speaker 0: SEN. JOHN BARRASSO, R-Iowa. Becky, I want to go after entitlements. It's where the money is.

Speaker 1: You're not going to solve this?

Speaker 0: At some point it's going to happen. I'm going to give you some numbers to tell you why it's going to happen no matter what. Anyway, getting back to the question, and then I really want to leave it. Because that's something that's in the past. We can't fix it.

We missed a once-in-a-century opportunity. And let's just not discuss it.

Speaker 1: Everybody else found out. That's your point. Everybody you know extended mortgages.

Speaker 0: No, so here's the thing. Yesterday, Steve Leesman said, I wanted Treasury to trade like a hedge fund. I do not want Treasury to be trading and messing around with the maturity of debt. All I'm saying is in 2021, Janet Yellen and Mnuchin before her, we spent $5 trillion. The idiots were lined up out there wild to buy treasury debt at 182%, whatever you want to call it, let's not like play gotcha on this 1, okay?

Or 1.1%, with nominal GDP growing at 10%. 10%. Okay, so look, it's not like it took Stan Druckenmiller to figure out that you're at like a 700-year low in interest rates. Okay, nominal GDP is growing 10% that the risk-reward of issuing debt at 1.1% in the 10-year is off the charts. How off the charts was that risk reward?

80% of American households, 80% refinanced their mortgage. They lengthened the average maturity of mortgage debt from 3.5 years to 8 years. As a consequence, it's going to take 5 years for that maturity to go up to get back to like 4 and a half. So it's just huge in terms of what they say.

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Stanley Druckenmiller: The government needs to stop spending like ‘drunken sailors'