Wall Street Braces for Biggest Treasury Sales Overhaul in Years
(Bloomberg) -- After Treasury Secretary Scott Bessent surprised dealers with his willingness to intervene in the bond market to drive down yields in recent months, Wall Street is now girding for the biggest revamp in guidance for US Treasuries issuance since early 2024.
Many dealers expect the Treasury to alter the guidance in its quarterly policy statement, which for more than two years has laid out steady plans for note and bond issuance. A shift in Wednesday’s announcement could pave the way for potential cuts in 2027 to sales of the longest-dated debt, balanced by bigger auctions of bills and shorter-term notes.
Some are prepping for more drastic action. Citigroup Inc. predicts the Treasury will announce cuts to sales of 20- and 30-year bonds starting this month — effectively violating the guidance issued in the last so-called quarterly refunding statement. Just one week after that last plan, Bessent unexpectedly ramped up buybacks of outstanding securities, in a move seen as a reaction to a surge in yields.
“Buybacks are too small to really move the needle,” April LaRusse, head of investment specialists at Insight Investment, said in an interview. She put it simply: “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.”
The proviso for any major shakeup this week is that yields have retreated since longer-dated rates hit their highest in more than two decades in early October. Still, 30-year bonds on Friday were trading with yields above 5.30%, around levels seen in mid-August when Bessent intervened with his expanded buyback program.
Another consideration: relying even more heavily on bills, which mature in up to a year, to meet expanding funding needs at some point is bound at some point to test the appetite of investors. With rapidly maturing bills having to be refunded constantly, the US now auctions in excess of half a trillion dollars in any given week, leaving the Treasury exposed to sudden swings. Last week, officials sold a record $839 billion.
“Guidance is more likely than immediate action” to alter issuance strategy, said Phoebe White, head of US rates strategy at UBS Group AG. Still, the Treasury’s recent “unconventional” behavior does “increase the odds that Treasury actions continue to deviate from historical precedent,” she said.
UBS is among those seeing no change in actual issuance until May. The Treasury already opened the door to a shift in August, when officials made a subtle tweak to their guidance, saying they were evaluating potential future “changes” in coupon and floating-rate note sales instead of the previous reference to potential “increases.”
As for next week’s quarterly refunding auctions, unchanged issuance sizes would mean they will total $125 billion, and consist of:
Ever since Bessent’s predecessor, Janet Yellen, established the current guidance about expecting to hold note and bond sales steady for quarters to come, dealers have expected increases to resume in time. That’s due to the ever-increasing amount of public debt, with the government running annual deficits of around $2 trillion. On Monday, the Treasury will offer an update of its latest estimate of quarterly borrowing needs.
In preparing for Wednesday’s statement, the Treasury used its regular pre-refunding questionnaire of primary dealers to ask about “structural changes in investor demand” for Treasuries, and “what futures changes to auction sizes should Treasury consider.”
At the heart of what the Treasury’s been engaged in is its “discomfort with the level of yields,” JPMorgan Chase and Co. strategists led by Jay Barry wrote in their refunding preview. Even so, the team expects the Treasury to maintain the “next several quarters” language into 2027, and to keep auction sizes unchanged through next August, before embarking on a series of increases focused on 2- to 10-year securities.
JPMorgan’s view contrasts with the many dealers anticipating a change. The Barclays Plc team led by Anshul Pradhan suggested officials replace the “at least the next several quarters” language with “the coming quarters” — a move they say would provide the Treasury with “flexibility over both the timing and composition of issuance.”
Some version of the current language has been in place since January 2024, despite intermittent investor calls to get rid of it. Bank of America Corp., Goldman Sachs Group Inc. and UBS are among other banks on the lookout for a change.
Observers will also on Wednesday be on watch for discussion points from the Treasury Borrowing Advisory Committee, a panel of investors, dealers and other market participants that meets with top officials. Any TBAC feedback on the market’s ability to keep absorbing bigger bill sales could be particularly meaningful.
With federal borrowing continuing to rise and no increase in note and bond sales to help pay for it, the bill share of debt outstanding has steadily risen, to around 22% as of September. That’s above the 20% level that the TBAC in 2024 advised as an average over time.
JPMorgan’s team argued that cutting long bond sales wouldn’t be prudent given the scale of borrowing required over the coming years, and early signs that demand for Treasury bills is stalling. Meantime, bill purchases from stablecoins, which Treasury officials have touted as a new source of demand, have yet to materalize at scale.
Wednesday may also bring new guidance on Treasury buybacks, after officials tripled those in the 10-year to 30-year sector to $6 billion each. Most investors expect officials will stick at that amount going forward, while maintaining the option to change.
“Making explicit that buybacks are part of the toolkit for managing the maturity composition of debt outstanding,” could strengthen the market impact, Goldman strategists led by William Marshall wrote in a note. The thinking might be that “it paves the way for Treasury to become less price sensitive in its operations,” they wrote.
--With assistance from Elizabeth Stanton.
More stories like this are available on bloomberg.com
©2026 Bloomberg L.P.
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