Wall Street strategists are revising their forecasts for US borrowing next year after the Treasury signaled that changes to auction sizes for notes and bonds may be coming. On Wednesday, the Treasury said it anticipates sales of interest-bearing securities, known as coupons, to remain steady "for the next several quarters." That replaces guidance in place for almost three years that it would stand pat for "at least the next several quarters."
The modest shift in wording prompted strategists at Citigroup Inc., TD Securities and Wells Fargo & Co. to rethink their outlooks for auction size changes next year. Citi, which had previously predicted cuts to long-end supply, no longer sees any reductions for such bonds. Instead, its strategists are eyeing increases to shorter-dated notes, those with maturities between 2 and 10 years, in February 2028, if not as early as the end of 2027. "It appears Treasury's support for the long end has come to a conclusion," Citi strategists Alejandra Vazquez Plata and Jason Williams wrote in a note.
TD and Wells Fargo pushed back their forecasts for both increases to shorter-dated notes and decreases for long bonds to August 2027, from early next year previously. Barclays Plc also sees changes in that month, though only increases to notes, with long bond auctions unchanged.
Most dealers had expected some alteration in guidance as the latest effort by Treasury Secretary Scott Bessent to temper this year's rise in yields. That followed his expansion of the department's buyback program for outstanding securities just two weeks after the August debt-management plan. In the past two quarters, some strategists had predicted language changes that never came. This time, the bulk of strategists expected a change, though they diverged on how exactly the Treasury would alter its signaling.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing