Business · Markets · 3 hrs ago
US Treasury Weighs Changes to Its Bond-Sale Guidance
The US Treasury is weighing changes to its bond-sale guidance, which sets out how much debt it plans to issue and at what maturities.
Treasury Secretary Scott Bessent has recently expanded buybacks of existing debt after long-term borrowing costs rose, but some investors say buybacks are too small to make a major difference.
Investors expect new guidance on Wednesday, though they disagree on whether actual changes to bond sales will come soon.
One possibility is to sell fewer 20- and 30-year bonds and rely more on Treasury bills, which mature within a year.
More short-term borrowing could increase refinancing risks, because those bills must be replaced regularly and demand can shift.
The Treasury sold a record $839 billion in bills last week, and bills made up about 22% of federal debt in September, above a long-term advisory target of 20%.
Banks differ on when or whether sales will change, and the Treasury is also due to update its estimate of quarterly borrowing needs on Monday.
The US Treasury may change its borrowing guidance, potentially paving the way for less long-term debt issuance and more short-term borrowing.
Many market participants expect the change in a quarterly plan due on Wednesday, while Citigroup expects cuts to 20- and 30-year bond sales as soon as this month.
The shift could help meet rising financing needs, but short-term Treasury bills must be refinanced frequently and demand for them may be tested.
The Treasury sold a record $839 billion in bills last week.
Banks disagree on whether and when actual issuance changes will happen.
- Who
- The US Treasury, led by Treasury Secretary Scott Bessent.
- What
- It may change its borrowing guidance and could reduce long-term bond sales while relying more on short-term debt.
- When
- A quarterly borrowing plan is due Wednesday. Citigroup expects possible cuts to 20- and 30-year sales starting this month.
- Where
- The United States.
- Why
- The government faces rising financing needs amid an annual deficit of nearly $2 trillion. The change may also reflect concern about high long-term bond yields.
US institutions expecting flexibility or reduced long-term issuance
JPMorgan
Issuance strategy
US institutions expecting flexibility or reduced long-term issuance
They expect the Treasury to change its guidance or reduce long-term bond sales, potentially relying more on short-term debt.
JPMorgan
JPMorgan expects the Treasury to keep its current approach through 2027 and leave auction sizes unchanged until next August.
Timing
US institutions expecting flexibility or reduced long-term issuance
Citigroup expects cuts to 20- and 30-year bond sales starting this month; UBS expects guidance changes rather than immediate issuance changes, with actual changes not starting until May.
JPMorgan
JPMorgan expects no change in auction sizes until next August.
Long-term interest rates reached their highest levels in more than 20 years.
The Treasury adjusted its guidance to refer to evaluating possible changes in bond sales rather than possible increases.
The Treasury sold a record $839 billion in bills.
The Treasury is due to release its quarterly borrowing plan.
- Record bill sales last week
- $839 billion
- Bill maturity
- Up to one year
- Bill share of federal debt in September
- About 22%
- Quarterly refinancing auctions if sizes stay unchanged
- $125 billion
- Planned auction sizes
- $58 billion in 3-year notes; $42 billion in 10-year notes; $25 billion in 30-year bonds
2 sources
What people are saying
Buybacks are so small that they do not make a meaningful difference.
If you run the Treasury and your main authority is issuing debt, and you are not happy with yield levels, you adjust your issuance.
A change in guidance is more likely than immediate action.