Analysis points out that if the USA Treasury increases the scale of more short-term note or Bonds auctions, it will help stabilize the market. Given the recent market fluctuations, the Treasury may even consider a slight reduction in the scale of long-term Bonds auctions. After recent statements from Bessent indicating that increasing repurchases is an option, the market is closely monitoring whether there will be changes to the review plan.
After recent fluctuations in the US Bonds market, the upcoming debt Refinancing plan to be announced by the US Treasury has garnered attention, particularly regarding the Bonds maturity structure and repurchase plan.
On Wednesday, the US Treasury will unveil details of the second quarter debt Refinancing plan. On Monday, the US Treasury announced that borrowing is expected to reach $514 billion in the second quarter, an increase of $391 billion from the estimate in February, mainly due to cash balances at the start of the quarter being lower than expected due to the debt ceiling constraints.
Despite the surge in borrowing demand, market Analysts generally expect the Treasury to maintain the February tone in Wednesday's announcement, keeping the auction size unchanged for the fifth consecutive quarter, while the market is more focused on any changes to forward guidance that could influence market direction.
After turmoil in the Bonds market, will the maturity structure adjustment lean towards the short end?
US Treasury Secretary Brainerd has criticized former Secretary of the Treasury Yellen for overly relying on short-term debt, but so far has not indicated plans to change this policy. The market will closely watch whether Brainerd will alter her stance on the Bonds maturity structure.
In the refinancing meeting in February, which was also Brainerd's first refinancing meeting during her tenure, the US Treasury stated plans to keep most of the debt issuance plan unchanged over the next few quarters, surprising some traders who expected an announcement to increase the scale of long-term Bonds auctions.
Analysts pointed out that if the Treasury reaffirms the same guidance, it would indicate confidence in continuing to rely on short-term debt to meet any immediate debt demands, which would help the long-term Bonds market performance that bore the brunt of the "tariff panic" in early April.
Gennadiy Goldberg, the head of interest rate strategy at TD Securities in the USA, stated that if the Treasury chooses to increase the size of short-term bill or bond auctions, "it will be warmly welcomed by the market," adding that "this would truly help stabilize the market, as there is still considerable uncertainty in the economy right now."
Analysts at BNP Paribas even believe that given the recent market volatility, the Treasury may consider a slight reduction in the size of long-term coupon bond auctions as a "cost-effective option."
Will there be any changes to the repurchase plan?
Another key focus is the Treasury's bond repurchase plan.
Since May 2024, the Treasury has been repurchasing older, less actively traded bonds from investors in order to improve the resilience and liquidity of the bond market. According to Barron's Weekly, the Treasury is currently repurchasing no more than 30 billion dollars of inactive securities each month and is conducting two operations, each not exceeding 2 billion dollars, targeting long-term debt with maturities of 10-20 years and 20-30 years respectively.
Analysts believe that these repurchases are aimed at maintaining regularity and predictability, which is the fundamental pillar for the Treasury to avoid injecting uncertainty into the market. On Wednesday morning, investors will be paying attention to whether the Treasury will change this practice when disclosing repurchase conditions.
Interest rate strategists at Société Générale believe that the Treasury may increase the size of long-term repurchases in the future, potentially up to 3 billion dollars, as a means to enhance liquidity. Anshul Pradhan, head of US interest rate research at Barclays, stated that the repurchase plan may "become more flexible."
These speculations originate from Treasury Secretary Janet Yellen's interview two weeks ago, where she mentioned that the Treasury has a "large toolbox at its disposal" to respond to market pressures. At that time, the bond market had experienced a large sell-off, and Yellen mentioned that increasing repurchases was one option—though she said, "We are far from that."
However, there are risks and controversies surrounding the Treasury's more active market interventions. At a recent investor seminar hosted by JPMorgan, a speaker warned of the risks of Treasury intervention: "The Treasury should not play an active role in financial stability, as this responsibility should be borne by the Federal Reserve. An active approach by the Treasury in managing yields may undermine Institutional credibility."
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