US Treasury keeps notes, bonds auction sizes steady, increases debt buybacks

By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) -The U.S. Treasury Department said on Wednesday it does not anticipate increasing auction sizes for notes and bonds for at least the next several quarters, in line with market expectations, as it announced a $125 billion refunding from August to October 2025.

It will, however, continue to make incremental increases to the size of Treasury Inflation-Protected Securities (TIPS) and T-bill auctions.

“We use T-bills as a shock absorber for unexpected, seasonal or short term variations in borrowing needs as part of our regular and predictable issuance plan,” a senior Treasury official said in a call with reporters on Wednesday.

“That’s because we believe … changes in borrowing needs and addressing them in the people market is the most effective way to borrow at the least cost over time because of the ability of that market to absorb those kind of short-term changes. We think that the level of bill issuance offered today is very consistent with those plans and has helped us in light of the changes.”

In a statement, department will further sell $58 billion in U.S. three-year notes, $42 billion in 10-year notes, and $25 billion in 30-year bonds next week. These were the same auction sizes for the same securities announced at the February refunding.

The Treasury also announced it will double the frequency of long-end nominal buybacks and increase the size of cash management buybacks, all aimed at improving liquidity in the market. The changes to the buybacks will take effect on August 13.

“The Treasury will be focusing more on bill supply and they are trying to help market liquidity by increasing the sizes and frequency of buybacks, especially in the long end of the curve,” said Gennadiy Goldberg, head of U.S. rates strategy, at TD Securities in New York. “So net net, this should be slightly positive for the long end.”

Long-dated Treasuries briefly rallied after the refunding announcement, pushing their yields lower. But their yields were last higher on the day as the initial impact from the refunding was muddied by the strong U.S. gross domestic product number.

U.S. 10-year yields were last up 4.4 basis points at 4.372%.

The Treasury announced that it’s increasing the frequency of liquidity support buybacks in both the 10- to 20-year and 20- to 30-year nominal buckets to four times per quarter from two currently. But it will keep the current $2 billion maximum purchase per operation in both sectors.

With respect to the other nominal coupon pairs, the department will continue to conduct one liquidity support operation per quarter for up to $4 billion.