US Treasury retains debt issuance guidance through 2027, shifting more weight to short-term bills

The US Treasury is sticking with its playbook. On August 5, the department confirmed it will keep auction sizes for nominal interest-bearing securities and floating-rate notes unchanged, extending forward guidance that has been in place since early 2024 through at least mid-2027. The T-bill trade-off Here’s the thing about keeping coupon sizes flat while borrowing needs rise: the gap has to get filled somewhere. That somewhere is Treasury bills, the short-term IOUs that mature in a year or less. Bank of America analysts estimate that if current guidance holds, T-bills could constitute nearly 25% of total outstanding debt by the end of fiscal year 2027. That would be the highest proportion since 2004, excluding crisis periods like 2008 and 2020 when the government temporarily leaned on bills to fund emergency spending. The announcement came during the quarterly refunding process overseen by Treasury Secretary Scott Bessent. Primary dealers, the big banks that directly buy government debt at auction, have recalibrated their own forecasts accordingly. The consensus among them now projects no increases to coupon issuance sizes until May 2027 or later. What this means for fixed income a...