Citi Group Projects Reduction in U.S. Treasury Long-Term Bond Issuance

The U.S. Treasury is expected to reduce the issuance of 20-year and 30-year bonds. Citi Group anticipates that Treasury Secretary Scott Vessen will cut long-term bond supply and increase short-term bond issuance next month. There is also a possibility that the issuance of 20-year bonds could be completely halted. Citi Group forecasts a reduction of $3 billion each in the auction size for 20-year and 30-year bonds. The funding shortfall resulting from the reduction in long-term bond issuance is expected to be compensated by increasing short-term bond issuance. This approach adjusts the maturity composition rather than reducing the overall bond issuance size. The decision on whether to reduce long-term bond supply will be confirmed in a survey of Treasury dealers scheduled for the 16th. Wall Street is focusing on Secretary Vessen's actions as long-term Treasury yields rise to high levels. It remains uncertain how much the adjustment in long-term bond issuance will lower actual borrowing costs. If Citi Group's forecast materializes, the U.S. Treasury is expected to increase its reliance on short-term bonds instead of reducing long-term bond supply.

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