Wall Street braces for biggest overhaul of US Treasury issuance guidance since 2024
Wall Street is preparing for the biggest rewrite of US Treasury issuance guidance since early 2024, with some dealers betting the department will start trimming sales of the longest-dated debt as soon as this month. The quarterly refunding statement due on Wednesday has for more than two years promised steady note and bond auction sizes; a change would open the door to cuts in 2027 to 20- and 30-year sales, offset by larger bill and shorter-note auctions.
Citigroup expects more immediate action, predicting the Treasury will announce reductions in 20- and 30-year bond sales this month, effectively breaking the guidance issued in the last refunding statement. The department has already shown it will act outside precedent: a week after that statement, Secretary Scott Bessent expanded buybacks of outstanding securities, a move widely read as a response to a surge in yields. "If you're running the Treasury and your main power is issuance, if you don't like where the yields are, you adjust your issuance," April LaRusse, head of investment specialists at Insight Investment, said, adding that buybacks alone are "too small to really move the needle".
Yields have retreated since longer-dated rates hit their highest in more than two decades in early October, but 30-year bonds still traded above 5.30% on Friday, near the levels that prompted Bessent's buyback expansion in mid-August. UBS's Phoebe White expects "guidance is more likely than immediate action", though the department's recent "unconventional" behaviour raises the odds that its moves "continue to deviate from historical precedent". JPMorgan's Jay Barry, by contrast, expects the "next several quarters" language to survive into 2027 and auction sizes to stay unchanged until next August. Barclays has suggested replacing "at least the next several quarters" with "the coming quarters" to give the Treasury flexibility on timing and composition.
The Treasury's own pre-refunding questionnaire asked primary dealers about "structural changes in investor demand" and "what futures changes to auction sizes should Treasury consider". Officials have already signalled a shift: in August they said they were evaluating potential future "changes" in coupon and floating-rate note sales, rather than the previous reference to "increases".
The stakes are visible in the bill market. With deficits running at around $2 trillion a year and no increase in note and bond sales to fund them, bills have climbed to about 22% of debt outstanding as of September, above the 20% the Treasury Borrowing Advisory Committee recommended in 2024. The US now auctions more than half a trillion dollars of bills in a given week, and sold a record $839 billion last week. JPMorgan argued that cutting long-bond sales would be imprudent given coming borrowing needs and early signs that bill demand is stalling, while purchases from stablecoins, which Treasury officials have touted as a new source of demand, have yet to materialise at scale. Investors will also watch for new buyback guidance after officials tripled purchases in the 10- to 30-year sector to $6 billion each; Goldman Sachs strategists said making explicit that buybacks are a tool for managing maturity composition could strengthen their market impact.
