US Treasury keeps auction sizes steady, considering future increases

By Karen Brettell

Nov 5 (Reuters) - The U.S. Treasury Department on Wednesday said it expects to keep its nominal coupon and floating rate note auction sizes steady for at least the next several quarters, but is beginning to consider future increases.

The announcement came after some market participants had speculated that the Treasury might reduce the size of some longer-dated debt sales following recent increases in Treasury bill issuance.

“On the margin it was a little bit hawkish compared to what markets expected,” said Jan Nevruzi, U.S. Rates Strategist at TD Securities in New York.

The Treasury is now expected to drop the language that it expects to maintain auction sizes for at least the next several quarters as soon as the next refunding announcement in February.

Increases in some debt auction sizes are then likely to begin in late 2026 or early 2027, with the government's budget deficit expected to worsen over time.

A presentation by the Treasury Borrowing Advisory Committee, a group of banks and asset managers that advise the Treasury on its borrowing strategy, said that the current issuance mix is near the “efficient frontier” when considering debt service costs against volatility.

TBAC noted that the median primary dealer forecast is for increases in nominal coupon debt in fiscal years 2027 and 2028 in maturities from two to seven years, with the largest increases likely in two-year and five-year notes.

Increases in auction sizes for longer-dated nominal coupon debt, Treasury Inflation-Protected Securities and floating-rate notes are likely to be smaller.

The Treasury said it will increase the size of its 5-year TIPS reopening in December by $1 billion to $24 billion, while leaving the size of other TIPS auctions unchanged in the coming quarter.

The U.S. plans to sell $125 billion in its quarterly refunding next week, which will raise $26.8 billion in new cash and refund $98.2 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.

The Treasury will also vary the size of its bill issuance over the coming quarter based on its needs. It expects to make modest reductions to short-dated bill auction sizes in December, based on corporate and non-withheld tax receipts. It then expects to increase them again by the middle of January 2026, based on expected fiscal outflows.