Treasury holds steady on bond auctions amid easing supply concerns
Quarterly borrowing estimate of $574bn falls $3bn below prior forecast as market relief follows stable issuance guidance
The U.S. Treasury Department announced it will maintain current auction sizes for nominal coupon and floating rate notes for at least the next several quarters, easing investor concerns about surging government debt supply in a move that sent bond yields lower.
The Quarterly Refunding Statement released February 4 outlined plans to offer $125 billion of securities to refund approximately $90.2 billion of privately-held notes and bonds maturing February 15, raising about $34.8 billion in new cash from private investors. Treasury projects borrowing $574 billion in privately-held net marketable debt during the first quarter of 2026, a reduction of $3 billion from its November 2025 estimate.
"Treasury expects to maintain nominal coupon and FRN auction sizes for at least the next several quarters," Deputy Assistant Secretary for Federal Finance Brian Smith stated in the announcement, providing markets with greater visibility on future issuance levels.
The stable auction size guidance comes amid growing worries about Treasury's financing needs as the federal deficit continues to expand. The share of short-term Treasury bills in total issuance remains at 22%, above the Treasury Borrowing Advisory Committee's recommended 20% ceiling. This heavy reliance on bills amplifies rollover risk and heightens sensitivity to Federal Reserve policy rate changes.
Specific auction sizes for the February through April period include: 3-year notes at $58 billion, 10-year notes at $42 billion in February and $39 billion in subsequent months, and 30-year bonds at $25 billion in February declining to $22 billion in March and April. The Treasury also plans to purchase up to $38 billion in off-the-run securities for liquidity support and $75 billion in the one-month to two-year maturity range for cash management.
Market reaction to the announcement was measured, with the 10-year Treasury yield at 4.28% and the 30-year yield holding at 4.906% in Wednesday trading. The stability comes after a volatile period that saw long-term yields surge above 4.90% following stronger-than-expected economic data.
The Treasury's decision to hold auction sizes steady represents a cautious approach to debt management as the government navigates rising borrowing requirements against the backdrop of uncertain monetary policy. Analysts have noted that while the current commitment to stable issuance provides relief, underlying concerns about Treasury supply persist given projections of increasing primary deficits and growing financing needs.
Looking ahead, the Treasury anticipates the Treasury General Account balance will peak around $1.025 billion by late April before declining in May, assuming an $850 billion cash balance at the end of March. The department plans to reduce short-dated bill auction sizes by late March, potentially leading to a cumulative $250 billion to $300 billion net decline in total bill supply by early May.