A forecast from one of Wall Street's large rate desks is moving the conversation about how the Treasury finances itself. Citigroup said in a late-Friday note that Treasury Secretary Scott Bessent is likely to reduce the sizes of long-dated bond auctions and could even cancel sales of 20-year debt, Bloomberg reported. Nothing has been announced.
Jason Williams, Citi's head of US rates strategy, set out a base case of a $3 billion cut to each 20-year and 30-year auction, made up with more Treasury bills. If the Treasury adopts it, he said, the news would come at the department's next quarterly refunding announcement on 4 November, according to Briefs Finance.
What Citi is recommending
Williams told clients to position for 20-year bonds to outperform 10-year notes, on the prospect of a "reduction, or perhaps cancellation, of the 20-year bond." The 20-year is currently the highest-yielding point on the curve, Briefs Finance noted, which is part of why the trade is attractive if supply falls.
A first hint could come from the Treasury's dealer survey, scheduled for next Friday. Williams called the questionnaire a potential "bullish catalyst" if it asks major institutions whether long-end demand is being "partly cannibalized" by high-quality hyperscaler issuance. "While we do not think such IG supply has impacted the overall level of rates," he wrote, "we do think pension funds could be leaning into long-end IG bonds more than they typically have."
The doubts
Not everyone expects it to work. BNP Paribas strategists said this week they were sceptical that cutting long-bond supply would lower government borrowing costs, according to Bloomberg. The debate has been growing, it said, over what Bessent might do to help rein in yields near multi-decade highs.
The Treasury has said nothing publicly in the reports reviewed here, so everything above is a bank's expectation.
The week's backdrop
The timing fits the week's trading. The Treasury sold $58 billion of three-year notes on 6 October, $39 billion of ten-year notes on 7 October and $22 billion of 30-year bonds on 8 October, according to TreasuryDirect's auction results. The ten-year yield had closed at 5.31 per cent on 5 October, its highest close of the year in the Treasury's daily yield-curve data.
The sales then drew firm demand. The Financial Express reported that yields fell on Thursday after the 30-year auction drew what it called unexpectedly firm demand, only the second time that week yields across most maturities declined, though they remained close to 24-year highs. Federal Reserve Governor Christopher Waller said the same day that more rate increases would probably be needed, with "flexibility" over the pace, and the gap between two-year and ten-year yields narrowed to 47.1 basis points from 51.4.
That strength is a reason a cut might be on offer: a Treasury that can sell the bonds comfortably has more room to sell fewer of them. It is also a reason to be cautious about the forecast, because firm auctions reduce the pressure to change anything. Both readings are ours.
What shifting to bills would mean
Replacing long bonds with bills lowers the sensitivity of the Treasury's debt to long-term rates, but it raises how often the debt must be refinanced, so a spike in short-term rates reaches the budget faster, in a year when Washington has already paid heavily to borrow. That is general market reasoning rather than a claim in the Citi note, and the trade-off is part of why the idea is debated.
For households the link runs through mortgage rates, which follow the ten-year yield, the 30-year yield's September close at its highest since the bond returned in 2006, and a federal interest bill that reached $709 billion this year. The date to watch is 4 November, with the dealer survey as an early test next Friday, 16 October.
Citigroup's base case, the $3 billion figure, the 4 November announcement date, the possible cancellation of the 20-year bond, the dealer survey and the quotations from Jason Williams, and BNP Paribas's scepticism are from Bloomberg's report of 9 October 2026, as published by Yahoo Finance, and from Briefs Finance on 9 October 2026. The description of the 20-year as the highest-yielding tenor is from Briefs Finance. The 8 October yield decline after the 30-year auction, the flattening of the two-year and ten-year gap to 47.1 basis points and the Waller remarks are from The Financial Express, 9 October 2026. The sizes and dates of the three auctions of 6 to 8 October are from TreasuryDirect's auction results, and the ten-year closing yield is from the Treasury's daily par yield curve data. The reading of what bills mean for refinancing risk is our own and is general market reasoning, not a claim from the sources.
Topics marketstreasuriesbonds
