(Bloomberg) — The US Treasury on Wednesday maintained its guidance on keeping sales of longer-term debt unchanged well into 2025, despite newly installed Secretary Scott Bessent having criticized the issuance strategy of his predecessor before he was picked for the job.
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At the helm of US debt management policy for the first time, Bessent left broadly intact former Secretary Janet Yellen’s agenda. The Treasury will next week sell $125 billion of debt in its so-called quarterly refunding auctions, which span 3-, 10- and 30-year maturities, the same amount as in the past several quarters.
“Based on current projected borrowing needs, Treasury anticipates maintaining nominal coupon and FRN auction sizes for at least the next several quarters,” the department said in its statement on issuance plans. Coupons refer to interest-bearing securities and FRN stands for floating-rate notes.
Similar language has been in place since the last bump up in auction sizes at the start of last year. Bessent, a former hedge fund manager, along with a number of Republicans had charged Yellen with having held down longer-dated debt sales in order to depress long-term borrowing costs and aid the economy before the election.
The forward guidance was maintained even as the Treasury Borrowing Advisory Committee — a panel of outside advisers composed of dealers, fund managers and other market participants — “uniformly encouraged Treasury to consider removing or modifying” it, a separate statement showed Wednesday. “Some members preferred dropping the language altogether to reflect the uncertain outlook, though the majority preferred moderating the language at this meeting.”
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The gap of long-term yields above rates on Treasuries with shorter maturities narrowed after the refunding announcement. Ten-year yields were down about nine basis points to 4.42%, while rates on two-year notes were lower by almost five basis points.
A senior Treasury official told reporters, when asked about that guidance, that TBAC offers recommendations, but they are just that, and it’s the department that decides.
Dealers had widely predicted auction sizes would remain stable next week, but given projections for continued outsize US fiscal deficits, they have viewed increased sales of longer maturities as inevitable at some point. Before Wednesday’s announcement, many said the bump would come in November, while some saw it happening as early as August. Strategists at Morgan Stanley, by contrast, didn’t expect a change until next year.
