US Treasury to keep auction sizes steady over coming quarters

By Karen Brettell

April 30 (Reuters) - The U.S. Treasury Department on Wednesday said it expects to keep its coupon and floating-rate note auction sizes steady for at least the next several quarters and will study potential changes to its buyback program to support market liquidity.

Analysts expect the U.S. government will need to increase the size of its longer-dated debt auctions at some point, most likely early next year, and will change its guidance to reflect this situation in coming quarters.

For now, an improving shorter-term deficit picture will allow the government to push off any auction increases.

"Bill issuance is going to be muted this year. Treasury can rely on T-bills a little bit longer and is comfortable keeping coupon auctions unchanged through 2025," said Angelo Manolatos, a macro strategist at Wells Fargo.

Meanwhile, traders are also focused on whether Treasury will increase its buyback program or make other changes such as shortening its weighted average debt maturity to help market liquidity, after a sharp selloff earlier this month.

"Although guidance was unchanged, the market reaction suggests more was expected from Treasury. The curve steepened and 30-year swap spreads tightened after the announcement as some market participants likely expected increased liquidity support buybacks and/or a discussion about a shorter weighted average maturity," Manolatos said.

Longer-dated Treasuries took the brunt of bond market weakness after U.S. President Donald Trump on April 2 announced larger-than-expected tariffs on trading partners.

Treasury said it is not changing its Treasury buyback program this quarter but is evaluating potential enhancements to better achieve its liquidity support and cash management goals.

These measures include possible changes to maximum purchase amounts, the scheduling and frequency of buybacks, security eligibility, maturity bucket composition, execution process, and counterparty eligibility.

U.S. Treasury Secretary Scott Bessent criticized former Treasury Secretary Janet Yellen for relying too heavily on shorter-dated debt but has so far not indicated any plans to change the policy.

Treasury also said it will continue to incrementally increase the size of its Treasury Inflation-Protected Securities (TIPS) auctions.

It plans to sell $125 billion in its quarterly refunding next week, which will raise $30.8 billion in new cash and refund $94.2 billion in securities. This will include $58 billion in three-year notes, $42 billion in 10-year notes and $25 billion in 30-year bonds.