The US Treasury will maintain its current debt issuance scale and will not increase the issuance of medium- and long-term bonds in the coming quarters.

In its quarterly refinancing statement released on Wednesday, the U.S. Treasury decided to maintain the current issuance scale of medium- and long-term bonds, in line with broad market expectations. This move dispelled earlier market speculation that it might adjust its debt issuance structure to lower long-term borrowing costs.

The Treasury explicitly stated that it plans to keep the auction sizes of coupon-bearing bonds and floating rate notes steady “for at least the next few quarters.” This forward guidance has been in place for two years. The total refinancing amount for this quarter is $125 billion, composed as follows:

$58 billion in 3-year bonds to be issued on February 10$42 billion in 10-year bonds to be issued on February 11$25 billion in 30-year bonds to be issued on February 12

The statement noted that the Treasury is closely watching the Federal Reserve’s monthly short-term Treasury purchase program (amounting to $40 billion), launched last December and continuing through April this year to maintain ample reserves for the banking system, as well as the private sector’s growing demand for short-term Treasuries. This decision continues the longstanding principle of “regular and predictable” debt management. Although the new administration is focused on reducing financing costs, any move to cut issuance could contradict this core commitment.

Issuance strategy remains stable

In the statement, the Treasury reiterated it is still evaluating the possibility of increasing auction sizes for coupon-bearing bonds and floating rate notes in the future, and will “focus on structural demand trends and the potential costs and risks of various issuance methods.”

Goldman Sachs strategists William Marshall and Bill Zu analyzed prior to the statement’s release:

“Although the current administration’s emphasis on lowering financing costs has renewed questions over whether this goal might be achieved through more aggressive adjustments to the issuance mix, we expect the Treasury will not take such actions at this time.”

John Canavan, Chief Analyst at Oxford Economics, commented:

“The statement itself sends a very steady signal. The Treasury again clarified that auction sizes for coupon-bearing bonds and floating rate notes will ‘remain unchanged at least for the next few quarters.’”

Morgan Stanley’s strategy team pointed out in its refinancing preview that the Fed’s purchase program reduces the risk of the Treasury “oversupplying” short-term Treasuries to the market, beyond what the private sector can absorb.

However, the report also warned that the Fed’s asset purchase path after April remains unclear, especially with Kevin Warsh nominated as the next Fed Chair. Warsh’s public positions in the past have favored reducing the size of the Fed’s securities portfolio, which could introduce uncertainty to future policy paths.

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