Wall Street prepares for major US Treasury issuance guidance overhaul
Dealers expect Treasury Secretary Scott Bessent to alter quarterly policy statements regarding note and bond issuance.
Wall Street is preparing for the most significant revamp in US Treasury issuance guidance since early 2024, according to a report by Mint citing Bloomberg. Many dealers expect Treasury Secretary Scott Bessent to alter the guidance in an upcoming quarterly policy statement.
The shift could involve reducing sales of the longest-dated debt in 2027, balanced by larger auctions of bills and shorter-term notes. Citigroup Inc. predicts the Treasury may announce cuts to 20- and 30-year bond sales starting this month.
Phoebe White, head of US rates strategy at UBS Group AG, said guidance is more likely than immediate action to alter issuance strategy. She noted that recent unconventional behaviour increases the odds that Treasury actions continue to deviate from historical precedent.
The Treasury recently used a questionnaire for primary dealers to ask about structural changes in investor demand and potential changes to auction sizes. This follows a period where Bessent unexpectedly increased buybacks of outstanding securities to react to rising yields.
JPMorgan Chase and Co. strategists, led by Jay Barry, expect the Treasury to maintain current language into 2027 and keep auction sizes unchanged through next August. However, the Barclays Plc team led by Anshul Pradhan suggested officials could replace current language to provide more flexibility over issuance timing and composition.
