Citi: Bessent May Cut Long-Term Treasury Issuance in November
nashnova research
Citi expects Treasury Secretary Scott Bessent to announce cuts to long-dated bond auction sizes — and possibly scrap 20-year issuance entirely — at the November 4 quarterly refunding, plugging the gap with more T-bills. The move would reshape the yield curve.
What exactly is Citi forecasting?
Citi's base case: cut 20-year and 30-year auction sizes by $3 billion each, with an outright cancellation of the 20-year a live possibility.
The shortfall gets filled by more T-bill issuance — short-term government IOUs maturing within a year.
This means → Treasury shifts its funding mix from "borrow long" to "borrow short," shrinking long-end supply while expanding the front end.
Why single out the 20-year?
Jason Williams, Citi's head of US rates strategy, recommends clients position now — bet on the 20-year outperforming the 10-year.
The logic: if 20-year supply shrinks or disappears, scarcity pushes its price up and its yield down.
In plain terms = when a bond might get rarer — or vanish entirely — owning it becomes the better trade.
Why is next week's dealer survey a catalyst?
Williams flags the primary-dealer questionnaire — a survey Treasury sends to the big banks authorized to bid directly at auctions — due next week.
The key tell: whether Treasury asks if ultra-long demand is being "cannibalized" by bond issuance from highly rated tech giants.
This means → if Treasury raises that question, it signals the department is already weighing a cut to ultra-long supply.
Where is the pension money going?
Williams argues that heavy investment-grade bond issuance by tech giants (hyperscale cloud companies) has not moved overall rate levels, but has redirected capital flows.
Pension funds and other long-duration investors may be "shifting more toward long-end investment-grade corporate bonds" — away from Treasuries.
This reflects a structural shift: the natural buyer base for ultra-long government debt is being pulled toward high-grade corporate alternatives.
Does Wall Street agree on this?
Not entirely. BNP Paribas strategists said earlier this week they doubt cutting long-end issuance can effectively lower the government's borrowing costs.
The core disagreement: Citi thinks reducing supply will push long-end yields down; BNP thinks the problem is on the demand side, so trimming supply alone may not work.
The November 4 quarterly refunding announcement is the first checkpoint where this debate gets tested.
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