No Surprises Expected from US Treasury on Upcoming Bond Auctions

The management team of U.S. Treasury Secretary Scott Besent is expected to maintain steady plans for selling longer-term securities, especially following recent fluctuations in the $29 trillion bond market. Despite previously criticizing his predecessor Janet Yellen’s tilt toward short-term government bonds, Besent has stated since taking office in January that the department remains far from replacing them with longer-term debt. Consequently, Wall Street does not anticipate changes in the announcement on Wednesday (April 30, 2025) regarding the anticipated sizes of auctions for the May–July quarter. The sharp increases in long-term Treasury yields over decades have only heightened the risk for Besent, who has zeroed in on suppressing long-term yields. The quarterly offering announcement traditionally provides guidance on how auction sizes might evolve. Any changes—especially in coupon sizes—will be communicated cautiously by Besent given the market volatility. The most recent February 5 announcement—Besent’s first during his tenure—kept the guidance consistent with Yellen’s era, predicting stable auction sizes for at least the next three months. An official from the Treasury Department did not respond Friday to a request for comment on issuance plans. The upcoming Wednesday announcement will set the size of so-called quarterly refunding auctions for the following week, including 3-, 10-, and 30-year maturities. It will also forecast sizes for all other note and bond auctions until the end of July. Without changes, next week’s auctions would total $125 billion. The federal debt limit further restricts the Treasury Department from altering its course. Operating below the debt ceiling until Congress raises or suspends it has required the government to reduce short-term bill issuance and cut its cash balance. When possible, Treasury offerings will increase to replenish the cash stockpile. The Treasury may provide guidance in Wednesday’s announcement regarding thoughts on the debt limit, including an estimate of when resources will be exhausted without an increase or suspension. Wall Street estimates fall within the August–October window based on government funding needs and fiscal balance trends through September. The bill issuance became a point of contention during the 2024 presidential elections when Republicans, including Besent, accused Yellen of limiting long-term debt sales to suppress market rates and support the economy ahead of November elections. Bills as a percentage of outstanding debt exceeded the 15%–20% range recommended by the Treasury Borrowing Advisory Committee, composed of investors, traders, and other market participants. Both TBAC and Yellen’s team responded to the criticism. While some auction sizes for certain Treasuries—particularly 7- and 20-year notes—are far from their 2021 peaks, others are at record levels, including the benchmark 10-year note. Increases could drive yields higher, though Besent has expressed a desire for their decline since assuming office. By Friday’s close, the 10-year yield was approximately 4.24%, slightly above the one-month bill rate. It dipped below 4% in early April for the first time since October after the administration presented a tax agenda considered harmful to the economy. The subsequent rebound—despite persistent underperformance of U.S. stocks—indicated investors no longer viewed Treasuries as a safe haven. Forecasts for continued large U.S. fiscal deficits explain why many traders expect potential increases in Treasury auction sizes. Meanwhile, the rapid growth of stablecoins—a type of cryptocurrency tied to the U.S. dollar—could support higher bill issuance levels, some observers say. The Treasury’s quarterly dealer survey, in preparation for Wednesday’s announcement, asked about demand for Treasuries as reserve assets for stablecoins. JPMorgan estimated that $114 billion in Treasury bills backed stablecoins at year-end, less than 2% of the $6 trillion outstanding. However, ‘the rapid growth of the stablecoin industry’ means it could become a ‘significant player’ in money markets, TD Securities strategists led by Gennadiy Goldberg noted. If there’s no change in guidance Wednesday, ‘we believe markets will interpret this as the Treasury being willing to rely more on bills,’ with positive implications for longer-term securities.