JPMorgan Asset Management’s Bob Michele has called on Treasury Secretary Scott Bessent to eliminate the 20-year Treasury bond, calling it an “orphan” issue that no longer serves a purpose. Speaking ahead of the Treasury’s quarterly debt sales announcement, Michele argued the 20-year maturity has struggled since its reintroduction in 2020 and does not make sense in the current market. The surge in long-dated yields to the highest since 2002 has sparked speculation the Treasury may shift focus to shorter-dated bills and notes.
While scrapping the 20-year bond remains a tail risk—with no dealer surveyed by Bloomberg forecasting such a move as their base case—Michele suggested rebalancing sales toward short-term bills, which mature in up to one year. He noted there are deeper liquidity pools elsewhere, such as the $8 trillion in money-market fund assets. An unexpected move to drop the maturity would break from the Treasury’s “regular and predictable” communication approach.
At its previous refunding statement in August, the Treasury said it envisaged no changes to auction sizes for “at least the next several quarters.” Since then, Bessent surprised traders with plans to boost buybacks of long-maturity Treasuries. While the revamp failed to bring lasting yield relief, it revived debate around the 20-year bond’s merits. Strategists at BNP Paribas SA warned such a move could have “unintended consequences,” including higher yields or lower liquidity.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing