Twenty-five years after the US Treasury shocked investors by ending sales of the 30-year bond, the Treasuries market is debating whether 20-year securities are next on the chopping block. Deutsche Bank AG strategist George Saravelos, back from visiting clients in New York, reported "mumblings of a coming suspension in 20-year Treasury issuance." A Citigroup Inc. counterpart is advising investors to position for the 20-year to outperform the 10-year on the prospect of a "reduction, or perhaps cancellation, of the 20-year bond."
The rationale would be to reduce the Treasury's borrowing costs. Steven Mnuchin, who brought the 20-year back in 2020, told Bloomberg in 2024 that the maturity should be cancelled, saying "It's just costly to the taxpayer." The 20-year has often yielded more than the bonds surrounding it, the 10-year and the 30-year, and that cost has become more pressing as interest expense surges with Treasury yields at multi-decade highs.
All eyes are on the Nov. 4 release of the Treasury Department's quarterly refunding statement. The key question is whether Treasury Secretary Scott Bessent will cancel the 20-year without laying specific groundwork first. ING's Padhraic Garvey said, "Nobody likes the 20 years," but his baseline view is that Bessent leaves it as it is. Citigroup anticipates a $3 billion reduction per auction for both the 20- and 30-year bonds, funded by additional T-bill issuance.
Demand is also a factor. Hyperscalers have been issuing large amounts of longer-dated bonds to fund the artificial intelligence build-out, competing with Treasuries for asset managers including pension funds. Investors are also demanding higher yields amid inflation fears, adding pressure on Treasury borrowing costs.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing