{"id":597156,"date":"2026-05-06T13:24:42","date_gmt":"2026-05-06T13:24:42","guid":{"rendered":"https:\/\/buglecall.org\/?p=597156"},"modified":"2026-05-06T13:24:42","modified_gmt":"2026-05-06T13:24:42","slug":"treasury-refunding-no-changes-to-auction-sizes-bessent-keeps-at-least-in-forward-guidance-3","status":"publish","type":"post","link":"https:\/\/buglecall.org\/?p=597156","title":{"rendered":"Treasury Refunding: No Changes To Auction Sizes; Bessent Keeps “At Least” In Forward Guidance"},"content":{"rendered":"

Treasury Refunding: No Changes To Auction Sizes; Bessent Keeps “At Least” In Forward Guidance<\/span><\/p>\n

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In our preview to this morning<\/a>‘s Quarterly Refunding Statement, we said that we do not expect major changes\u00a0and that, at most, the treasury might adjust its statement language to soften the forward guidance on possibly futures increase in coupon auction sizes with one likely change would be dropping \u201cat least\u201d <\/strong>while retaining the expectation for unchanged coupon sizes over \u201cthe next several quarters\u201d <\/strong>(recall\u00a0Deutsche Bank said it\u00a0expects nominal coupon increases beginning in February 2027).\u00a0<\/p>\n

Overnight, JPMorgan agreed, writing that while the current auction calendar will leave Treasury well financed through FY27, “we do not think it will be adequate to meet the widening funding gap from FY27 and onward, and we continue to project a series of coupon auction increases beginning in February 2027.” Accordingly, like DB, JPM also expected the Treasury to remove \u201cat least\u201d from the statement that \u201cTreasury anticipates maintaining nominal coupon and FRN auction sizes for at least the next several quarters.” <\/strong>The bank said that\u00a0If its expectations are realized, “we think this could push intermediate yields higher.”<\/p>\n

Well, moments ago the Treasury published its latest Quarterly Refunding Announcement, and contrary to prevailing expectations, it refused to make even a gentle hint at rising coupon sizes by keeping the “at least” language from the abovementioned statement, instead keeping it as is, or rather as was:\u00a0<\/p>\n

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Based on current projected borrowing needs, Treasury anticipates maintaining nominal coupon and FRN auction sizes for at least the next several quarters<\/strong><\/p>\n<\/blockquote>\n

In other words, the US Treasury signaled again that it\u2019s still comfortable using Yellen’s Activist Treasury Issuance <\/strong><\/em>playbook to issue Bills, and not increase coupon issuance, to meet escalating government borrowing needs, even as warnings emerge about the strategy\u2019s risks.<\/p>\n

Ahead of the QRA, dealers\u00a0were divided\u00a0heading into the so-called quarterly refunding release on whether it might alter its guidance. <\/strong>Outsize US fiscal deficits make an expansion in longer-dated auctions practically inevitable at some stage. The department on Monday boosted its estimate for\u00a0net borrowing\u00a0this quarter amid lower net cash flows.<\/p>\n

US debt managers have been using the same forward guidance since early 2024, in a policy that\u2019s steadily boosted the share of bills of total debt outstanding (to roughly 22% from 14% before covid). The International Monetary Fund cautioned last month that this leaves federal debt costs more vulnerable to sudden swings in rates and shifts in sentiment, because auctions are more frequent.<\/p>\n

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And sure enough, with no changes to the forward guidance:<\/p>\n