After a surge in yields, the US Treasury was hoping to stabilize auction sizes

By Karen Brecktel

NEW YORK (Reuters) – The US Treasury is expected to change most of its five-game auction size when it announced its refund plans Wednesday, but investors will focus on clues on how to increase the path or potentially likelihoods for a near-term cut.

The government will provide details on its issuance plan on Wednesday after saying it is expected to borrow $514 billion in the second quarter on Monday, a $391 billion higher than its February estimate.

The Treasury said it expects most debt issuance plans to remain the same in the February refund under first Treasury Secretary Scott Bescent in the next few quarters.

If the Treasury repeats the same guidance, it shows confidence that it can continue to rely more on shorter date debts, at least to meet short-term debt needs.

“The bigger focus is on changing forward guidance in terms of what can move through the market,” said Zachary Griffiths, Head of IG and Macro Strategy at Creditsights.

Bescent criticised former Treasury Secretary Janet Yellen for relying heavily on short-dated debts, but so far has not shown plans to change the policy.

Gennadiy Goldberg, Head US Rate Strategist at TD Securities in New York, said he welcomed the shift to increasing the size of shorter date memo auctions rather than other maturities.

“Instead of actually issuing more front-end auctions or more front-end data or more invoices, it would be very well received by the market,” he said. “It really helps the market stabilize a little because there is still a considerable amount of economic uncertainty.”

Treasury yields skyrocketed after President Donald Trump announced tariffs that were bigger than expected on April 2, and after Trump said he would suspend the 90-day increase a week later.

According to analysts at BNP Paribas, recent volatility could encourage the Treasury to consider making some small cuts to auctions that include long-term coupons as “high-backing options.”

“Our view of the administration was that it aimed to maintain the level of long-term yields included through bond vigilance,” they said in the report.

Traders will also monitor signs that the Treasury could increase buybacks as a result of market dysfunction. Bessent said earlier this month that buybacks are part of a large toolkit that the Treasury can deploy when needed.