Will US Treasury scrap 20-year bond sales?
TLT•The US Treasury may reduce or end 20-year bond sales as it weighs borrowing costs and rising federal debt. Citi strategists expect $3 billion cuts to 20- and 30-year auction sizes, while JPMorgan analysts say ending 20-year issuance would not be prudent.
1. Pressure on long-term borrowing
The Treasury’s Wednesday auction of $13 billion in 20-year bonds drew a 5.469% yield, the highest at a 20-year auction since 1986. Earlier this month, 10- and 30-year Treasury yields reached 5.36% and 5.66%, their highest levels since 2002. US federal debt has crossed $40 trillion, and fiscal 2026 interest costs reached a record $1.36 trillion, or 3.2% of GDP.
2. Possible issuance changes
The Treasury has increased planned buybacks of longer-dated debt from $2 billion to $6 billion, but it failed to purchase the full amount in the first two rounds in September. Long-dated yields rose as much as 50 basis points after the buyback announcement. Citi’s US rates strategists expect 20- and 30-year auction sizes to be cut by $3 billion, with additional bill issuance making up the difference; another option is to keep auction sizes unchanged while signaling future adjustments.
3. Arguments over 20-year bonds
The 20-year bond is among the least liquid parts of the yield curve and may require the government to offer a more attractive yield. JPMorgan analysts argue that ending issuance would not be prudent because the instrument raises $168 billion a year and provides a critical source of funding. The Treasury is due to unveil its quarterly refunding plans in the first week of November.
