After yield surge, US Treasury expected to keep auction sizes steady

By Karen Brettell

NEW YORK (Reuters) - The U.S. Treasury Department is expected to permission astir of its auction sizes unchanged for the 5th consecutive 4th erstwhile it announces its refunding plans this week, but investors volition absorption connected immoderate clues astir increases further down the road, oregon connected the likelihood of a imaginable near-term cut.

The authorities volition denote its expected borrowing needs for the coming 2 quarters aboriginal connected Monday and connection details connected its issuance plans connected Wednesday.

The Treasury said astatine its refunding successful February, the archetypal nether Treasury Secretary Scott Bessent, that it expects to support astir of its indebtedness issuance plans unchanged for the adjacent fewer quarters, astonishing immoderate traders who had expected it would emblem larger auction sizes.

If the Treasury repeats the aforesaid guidance, that would bespeak assurance that it tin proceed to trust much connected shorter-dated indebtedness to capable immoderate indebtedness needs astatine slightest near-term, which would assistance longer-dated bonds that successful aboriginal April took the brunt of the “tariff tantrum.”

“The bigger focal constituent is immoderate changes to the guardant guidance successful presumption of what could determination the markets,” said Zachary Griffiths, caput of IG and macro strategy astatine CreditSights.

Bessent had criticized erstwhile Treasury Secretary Janet Yellen for relying excessively heavy connected shorter-dated indebtedness but has truthful acold not indicated immoderate plans to alteration the policy.

Gennadiy Goldberg, caput U.S. rates strategist astatine TD Securities successful New York, said investors would invited immoderate displacement toward expanding the size of shorter-dated enactment auctions, alternatively of different maturities.

"In lieu of really issuing much front-end auctions oregon much front-end information oregon much bills, that would beryllium precise well-received by markets," helium said. "That would truly assistance markets stabilize a small spot arsenic there's inactive rather a spot of economical uncertainty."

Longer-dated Treasury yields surged aft U.S. President Donald Trump unveiled larger than expected tariffs connected April 2, earlier stabilizing aft Trump a week aboriginal said helium would intermission increases for astir countries for 90 days.

The caller volatility could promote the Treasury to see making immoderate tiny cuts to longer-dated coupon-bearing auctions arsenic a “high bang-for-the-buck option,” according to analysts astatine BNP Paribas.

“Our presumption of the medication has been that it aims to support the level of long-end yields contained via enslaved vigilance,” they said successful a report.

Traders volition besides ticker for immoderate indications the Treasury could summation buybacks arsenic a effect of marketplace dysfunction. Bessent said earlier this period that buybacks were portion of a large instrumentality kit the Treasury could deploy if needed.