On Wednesday, the U.S. Treasury will release its quarterly refinancing statement, and the market expects this could mark the largest adjustment to U.S. Treasury issuance guidance since early 2024. Citi even predicts that the Treasury may bring forward cuts to 20-year and 30-year bond offerings, shifting instead to an increased supply of short- and medium-term bonds. However, with the share of Treasury bills already rising to 22%, mounting funding pressures at the short end and persistent demand for long-term borrowing are putting the Treasury's issuance‑structure adjustments in a difficult position.
The U.S. Treasury will release its quarterly refinancing announcement this Wednesday, as Wall Street braces for what could be the largest adjustment to its Treasury‑bond issuance guidance since early 2024. Elevated long‑term yields and the ongoing expansion of the debt burden have placed the Treasury's issuance strategy squarely in the spotlight.
Recent unconventional moves by Treasury Secretary Scott Bessent have left markets on edge. Just one week after the last quarterly statement, Bessent unexpectedly expanded the scale of bond buybacks, a move widely seen as a direct response to soaring yields. Meanwhile, in August the Treasury quietly revised its wording, changing its description of future coupon‑bearing bond sales from "potential increase" to "potential change," signaling to observers the first hints of a policy shift.
If Wednesday's statement revises the issuance guidance, it could pave the way for a reduction in ultra‑long‑term bond offerings by 2027, offset by an expansion of short‑term Treasury bill and medium‑to‑short‑term note issuance. At present, the yield on the U.S. 10-year Treasury note was trading near 4.91% ahead of the announcement, while the 30-year yield remained above 5.30%.
Citi: Ultra-long-term bond tapering may "land ahead of schedule"
Most traders expect the Treasury to signal its intentions through its wording, but Citigroup's outlook is more aggressive. Citigroup predicts that the Treasury will announce, starting this month, a direct reduction in the issuance of 20-year and 30-year Treasury bonds—a move that would effectively contravene the issuance plan set forth in the previous quarterly refinancing statement, with an extent and pace that exceed broad market expectations.
A relative majority of Wall Street institutions expect any substantive issuance adjustments to take effect no earlier than May next year, with this week's statement likely focusing primarily on changes in forward guidance. Phoebe White, head of U.S. rates strategy at UBS Group, said, "Changes in guidance are more likely than immediate action," but she also noted that the Treasury's recent "unconventional" measures have indeed "increased the likelihood that Treasury actions will continue to deviate from historical precedents."
A difference of a single character carries the weight of a thousand pieces of gold.
In this week's statement, one of the market's most closely watched developments is the specific wording of the forward guidance. Since January 2024, the Ministry of Finance has consistently employed a formulation along the lines of "maintaining a stable issuance scale for at least the next few quarters," a commitment that has served as a key anchor for market pricing over the past two-plus years.
Anshul Pradhan, the lead analyst on the Barclays team, suggests that officials should replace "at least the next few quarters" with "the next few quarters." This seemingly minor revision would give the Treasury greater flexibility in choosing the timing and structure of its bond issuances. Bank of America, Goldman Sachs, and UBS Group are all closely monitoring whether this wording will change.
In contrast, a team led by JPMorgan strategist Jay Barry believes the Treasury will extend its "the next several quarters" language through 2027 and keep auction sizes unchanged until August next year, after which it will launch another round of issuance expansion focused on 2- to 10-year bonds. JPMorgan argues that, given the substantial borrowing needs over the coming years, reducing long-term bond issuance would not be prudent.
High proportion of treasury bills raises concerns about pressure on the short end
Another constraint on the Treasury's adjustment of its issuance structure stems from the strain on the short‑end market. As federal borrowing continues to expand and the issuance of longer‑dated, higher‑coupon bonds has lagged behind, the share of Treasury bills in the outstanding debt has steadily risen to roughly 22% as of the end of September—exceeding the 20% long‑term average recommended by the Treasury Borrowing Advisory Committee (TBAC) in 2024.
Under the pressure of rolling over maturing securities, the U.S. Treasury now conducts weekly auctions totaling more than $500 billion. Last week, officials set a record by auctioning off $839 billion, a figure that, according to Bloomberg, has surpassed the previous peak. If short-term financing becomes overly concentrated, the Treasury will become more vulnerable to sudden shifts in market sentiment. JPMorgan's team has also observed signs of weakening demand for Treasury bills, while the stablecoin buying that Treasury officials had pinned their hopes on has yet to materialize on a substantial scale.
This Wednesday, the market will also be watching TBAC's assessment and feedback on its ability to continue absorbing larger volumes of Treasury securities, a discussion that will provide important guidance on the policy path.
From "Tactical Patch" to "Structural Arrangement"
In addition to the issuance guidelines, this week's statement may provide a new overarching framework for treasury bond repurchase operations. Officials have previously tripled the size of 10- to 30-year bond repurchases to $6 billion per session; most market participants now expect this pace to remain unchanged while retaining the option for flexible adjustments.
April LaRusse, head of investment strategy at Insight Investment, stated bluntly, "The scale of buybacks is too small to truly move the needle," and noted that if the Treasury were genuinely concerned about yield levels, adjusting the issuance structure would be its primary tool.
Goldman Sachs strategist William Marshall and his team argued in a research report that explicitly stating that buybacks are part of the policy toolkit for managing the duration structure of outstanding debt would help bolster their market influence. Goldman Sachs believes such a statement could provide the Treasury with grounds to "reduce price sensitivity" in future operations, thereby enabling buybacks to evolve from temporary market‑intervention measures into a systematic issuance‑management mechanism.
This round of refinancing auction plan
With respect to the quarterly refinancing auction corresponding to Wednesday's announcement, if the issuance size remains unchanged, the total amount will reach $125 billion, allocated as follows: $58 billion in 3-year notes on November 9, $42 billion in 10-year notes on November 10, and $25 billion in 30-year bonds on November 12. Against the backdrop of the U.S. government's annual fiscal deficit remaining around $2 trillion, the long-term trajectory of debt expansion implies that, regardless of this week's decisions, issuance volumes will ultimately and inevitably trend upward.
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