BNP Paribas Warns: Abolishing 20-Year Treasuries Could Push Yields Higher
nashnova research
BNP Paribas warns that abolishing the 20-year US Treasury bond would not lower borrowing costs — instead it could push yields higher and drain liquidity, signaling to markets that the Treasury has run out of tools.
What exactly is BNP Paribas warning about?
BNP's US rates strategy team, led by Guneet Dhingra, wrote in a client note that scrapping the 20-year bond would be read by markets as a panic move.
This means → instead of seeing a clever technical fix, traders would conclude the Treasury's toolbox is empty — and that would embolden bond vigilantes (investors who sell government bonds to pressure fiscal policy changes).
The team maintains its short on 30-year Treasuries, targeting a yield rise from the current 5.64% to 5.8%.
Why has the 20-year bond become a flashpoint?
The 20-year yield stood at 5.68% on Tuesday, after touching 5.75% the day before — the highest since the tenor was reintroduced in 2020.
Its yield sits above neighboring maturities (the 10-year and 30-year), a market anomaly.
In plain terms = the 20-year is the hardest maturity to sell and the ugliest on the curve — which is why some call for scrapping it. BNP argues that doing so would create bigger problems than it solves.
Why can't supply-side tweaks fix the problem?
BNP notes that the Treasury's earlier move — expanding long-bond buybacks in a so-called "Treasury Twist" — offered only brief relief before yields resumed climbing to 24-year highs.
Cutting long-end issuance would force the Treasury to sell more short-dated bills; with the Fed still in a tightening cycle, short-term borrowing costs are higher.
This reflects a fundamental limit: reshuffling the maturity mix is what BNP's team calls "a Band-Aid on a gunshot wound."
Where is the real problem?
The team states plainly: until inflation and the deficit are addressed, any toolbox maneuver is a surface fix.
They see "almost no sign" that these core issues are being tackled.
This means → every failed Band-Aid erodes market confidence in the Treasury further — and the next test comes on November 4, when the quarterly refunding announcement will reveal the latest issuance plan. Markets will parse every signal for supply-structure changes.
市场有风险，内容仅供研究参考，不构成投资建议。