Treasury dealers expect cuts to 20- and 30-year bond auctions in 2027
Key Facts
Primary dealers expect U.S. Treasury auctions of 20- and 30-year bonds to be cut sometime in 2027, with issuance increased in maturities ranging from two to 10 years, according to a Reuters report published on November 2. But the market is not expecting an immediate cut in coupon auction sizes; the Treasury is likely to keep them unchanged in this week’s quarterly refunding announcement. The focus is on whether the department will change its guidance on the borrowing mix in the coming years. An official at BNP Paribas said any actual change would probably not begin before August 2027. “Any actual change would be after the next several quarters, which likely means nothing before August 2027 at the earliest,” the official added.
The expectations for a reallocation of issuance follow the Treasury’s October request to primary dealers for views on changes to auction sizes, in light of projected borrowing needs and investor demand. In August, the Treasury Borrowing Advisory Committee unanimously recommended keeping auction sizes for nominal coupons, floating-rate notes and Treasury inflation-protected securities at current levels. The committee said current coupon auction sizes were sufficient to meet projected borrowing needs through the end of fiscal year 2026. It also said higher coupon issuance could become warranted in fiscal year 2027, while dealers generally expected sizes to increase sometime that year. In its August statement, the Treasury said it expected to keep nominal coupon and floating-rate note sizes unchanged for at least several quarters, while assessing any changes in light of structural demand, issuance costs and risks.
Funding estimates put the scale of future needs at the center of the debate over borrowing maturities. The U.S. federal deficit reached $1.992 trillion in fiscal year 2026, and JPMorgan expects it to reach $1.960 trillion in fiscal year 2027, unchanged from its previous estimate. The median primary dealer estimate put the funding gap at $1.45 trillion for fiscal years 2027 and 2028, based on current coupon auction sizes and the privately held supply of Treasury bills. The Treasury said current auction sizes put it in a good position to meet projected financing needs through the end of fiscal year 2026. In its estimate published in August, it projected borrowing $628 billion in privately held net marketable debt in the October-to-December 2026 quarter, assuming a cash balance of $850 billion at the end of December.
The projections reflect both a desire to adjust borrowing maturities and the need to finance the deficit. TD Securities projected net Treasury bill supply of $678 billion between November 2026 and January 2027, highlighting the scale of short-term issuance under discussion. The Treasury’s schedule published in August showed 20-year bond auctions holding at $13 billion a month in September and October, and 30-year bond auctions at $22 billion in each month. Dealers expected coupon sizes to rise in 2027, while the latest projections target cuts to auctions at the long end and increased issuance between two and 10 years. This suggests the potential adjustment would be in the allocation of borrowing across maturities, while the market does not expect sizes to change in the current announcement.
Reducing the supply of long-term debt could help limit borrowing costs at that end of the yield curve, but the effect remains tied to broader economic factors. A Wells Fargo analyst said slower growth, reduced growth expectations and lower energy prices were key factors behind the decline in long-term yields. “We also need energy prices to fall; those will be the real drivers of lower long-term yields,” the analyst added. The debate therefore is not limited to how many bonds the Treasury will sell, but also extends to the growth and energy conditions that affect yields. The Reuters report did not cite market moves directly linked to the November 2 expectations.
In a parallel move, the Treasury expanded long-dated nominal bond buybacks to support liquidity in those sectors. It raised the maximum size of each operation from $2 billion to at least $4 billion, effective September 9 through the end of the refunding quarter on November 4, 2026. This places the liquidity-support measure in the same period in which 20- and 30-year bond auction sizes remain unchanged under the published schedule for September and October. The quarterly refunding announcement is due on Wednesday, November 4, 2026. It follows funding estimates released earlier in the week, as investors await details from the Treasury on issuance policy and the maturity mix of its debt.