The US Treasury dropped the words at least from its guidance on future auction sizes, a change analysts expect to pave the way for larger short- and intermediate-dated sales. Longer-dated auctions are seen as the most likely to be cut. The shift follows a bond selloff last month.
The US Treasury Department on Wednesday altered its language on future auction sizes, and analysts expect the change to pave the way for larger sales of short- and intermediate-dated debt and possible cuts to longer-dated auctions.
Last month's bruising bond selloff pushed 10- and 30-year Treasury yields to their highest levels since 2002.
What changed in the guidance
Treasury dropped the term at least and now says it expects to keep floating-rate note and coupon auction sizes unchanged "for the next several quarters". Many analysts interpret "several" to mean two quarters, which would mean possible changes in the first half of 2027.
Speculation about auction size cuts began in August, when Treasury said it continued to evaluate potential future changes to its coupon and floating-rate auction sizes. That differed from its May refunding announcement, which had pointed to possible increases.
Where analysts see cuts and increases
The 20- and 30-year auctions, which have at times struggled to attract demand, are seen as the most likely to be cut. Coupon increases would probably be concentrated in the 2- to 7-year sector, and possibly in 10-year notes.
However, not everyone expects cuts to longer-dated debt. Treasury may also struggle to reduce auction sizes if its funding needs grow faster than expected, and outstanding Treasury debt has more than doubled over the past decade, from $14 trillion to $33 trillion.
Seven-year note, bills and buybacks
Treasury said it will convert the 7-year Treasury into a quarterly auction with two reopenings. It also expects to cut short-term bill auction sizes in December and raise them across the bill curve in January, based on seasonal fiscal outflows.
The department expects to buy back up to $70 billion in Treasuries across the curve for liquidity purposes. Next week it will sell $125 billion, including $58 billion in 3-year notes, $42 billion in 10-year notes and $25 billion in 30-year bonds.
Source: Reuters via Investing.com
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