Treasury Secretary Scott Bessent should resist calls to eliminate the 20-year bond, as doing so could push borrowing costs higher, according to BNP Paribas SA.
Strategists led by Guneet Dhingra argue the move "will not work" and could result in "unintended consequences" such as higher yields and lower liquidity. Eliminating the 20-year "could be perceived as panic, and signal an exhaustion of the Treasury's toolkit, encouraging bond vigilantes," they wrote.
The debate adds uncertainty ahead of the Treasury's quarterly refunding statement on Nov. 4. The 20-year yield traded at 5.68% on Tuesday after hitting 5.75% — its highest since its 2020 reintroduction.
Dhingra's team called the expanded buybacks program a "band-aid on a gunshot wound," noting changes to supply have limited impact unless core issues around inflation and deficits are addressed.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing