Treasury Dealers See Cuts to 20- and 30-Year Bond Auctions in 2027
Key Facts
The U.S. Treasury is expected to leave coupon auction sizes unchanged in this week’s quarterly refunding announcement, while investors focus on potential changes to the issuance mix in 2027, according to Reuters. Dealer forecasts point to cuts in 20- and 30-year bond auctions and increased issuance of maturities from two to 10 years. This is not an announced Treasury decision; in its August guidance, the department said it expected to keep nominal coupon and floating-rate note auction sizes steady for several more quarters while continuing to assess future changes. Reducing supply at the long end of the yield curve could help limit long-term borrowing costs, Reuters reported. But a Wells Fargo analyst said lower long-term yields would require slower growth and weaker growth expectations, along with falling energy prices.
The debate comes as financing needs remain substantial. The U.S. deficit reached 1.992 trillion dollars in fiscal year 2026, while JPMorgan expects a deficit of 1.960 trillion dollars in 2027, according to Reuters. In August, the Treasury estimated net marketable borrowing from private-sector holdings of 628 billion dollars for the quarter from October to December, assuming a cash balance of 850 billion dollars at the end of December. In an earlier estimate for the July-to-September quarter, the department projected borrowing of 739 billion dollars and an ending cash balance of 950 billion dollars; the borrowing estimate was 68 billion dollars higher than the May estimate. These figures reflect the amount of financing the Treasury must raise as the market considers how to distribute issuance across maturities.
In the near term, TD Securities forecast net Treasury bill supply of 678 billion dollars for the period from November 2026 to January 2027. Wells Fargo sees bills’ share of the Treasury market reaching 24% in the medium term, compared with an average of 23% since World War II. By contrast, the Treasury Borrowing Advisory Committee recommended keeping bills’ share within a range of 15% to 20%. These estimates highlight the short-term financing trade-off: it allows issuance to increase without raising long-term supply, while investors and the advisory committee continue to monitor the bills share. The Treasury’s latest guidance still calls for nominal coupon and floating-rate note auction sizes to remain unchanged for several more quarters.
The Treasury raised the maximum size of liquidity-supporting bond buybacks from 2 billion dollars to at least 4 billion dollars per operation in the 10–20-year and 20–30-year sectors. The change is effective from September 9 through November 4, 2026, according to a department statement. The Treasury said the larger operation sizes reflect its desire to provide greater liquidity support in longer-dated nominal sectors, where it continues to receive high-quality offers. This is a tool to support liquidity in outstanding bonds, alongside the ongoing discussion about future auction sizes. The quarterly refunding process begins with a private-sector survey through questions to primary dealers, followed by advice from the Treasury Borrowing Advisory Committee, before policy decisions are announced in a department statement.
On the economic data front, compensation costs for civilian workers rose 0.8%, seasonally adjusted, in the three months ended September 2026, according to the Bureau of Labor Statistics. Wages and salaries increased 0.7%, while benefit costs rose 0.9% over the same period. On a non-seasonally adjusted annual basis, compensation costs rose 3.4% in the 12 months ended September, with wages and salaries up 3.1% and benefit costs up 3.9%. In a separate survey, the Institute for Supply Management’s manufacturing index climbed to 55.5 points in October from 54.5 in September, while economists polled by Reuters had expected it to remain at 54.5. Survey components showed the new orders index rising to 55.5 from 55.3, and the supplier deliveries index to 59.1 from 59.0.
In the same manufacturing survey, the measure of prices paid by factories for inputs fell to 75.2 points in October from 77.9 in September, but remained elevated; economists had expected it to decline to 77.5. Reuters said strong consumer spending and business spending on artificial intelligence supported manufacturing activity, while suppliers struggled to meet demand. In Asian trading on November 2, the U.S. two-year Treasury yield rose 1.5 basis points to 4.595%. By contrast, the 10-year yield fell 0.4 basis points to 4.924%, and the 30-year yield declined 0.7 basis points to 5.301%. The yield moves come as dealers await the Treasury’s quarterly announcement and economic data this week.
The September Job Openings and Labor Turnover report is scheduled for release on November 3, 2026, at 10 a.m. Eastern time, according to the Bureau of Labor Statistics calendar. The following day, November 4, the Treasury will hold its next quarterly refunding announcement, which the department said will provide additional information about the size of future buyback operations. Any actual change to coupon auction sizes is unlikely before August 2027, according to an estimate by BNP Paribas’ head of U.S. rates strategy cited by Reuters. The official said, "Any actual change is unlikely over the coming quarters, which means August 2027 is the earliest possible date."