The U.S. Treasury Department maintains the bond issuance scale unchanged and will not increase the issuance of medium- and long-term bonds in the coming quarters

The U.S. Treasury Department announced in its quarterly refinancing statement on Wednesday that it has decided to maintain the current issuance scale of medium- and long-term bonds, in line with market expectations. This move dispels previous market speculation about a possible adjustment to its bond issuance structure to reduce long-term borrowing costs.

The Treasury explicitly stated that it plans to keep the auction amounts of coupon bonds and floating rate notes stable for "at least the next few quarters," a forward guidance that has been in place for two years. The total refinancing amount for this quarter is $125 billion, with the following specific components:

• $58 billion in 3-year bonds issued on February 10
• $42 billion in 10-year bonds issued on February 11
• $25 billion in 30-year bonds issued on February 12

The statement noted that the Treasury is closely monitoring the Federal Reserve's monthly short-term Treasury purchase program (amounting to $40 billion) initiated last December to maintain sufficient reserves in the banking system, which will continue until April of this year, as well as the growing demand for short-term Treasuries from the private sector. This decision continues its long-standing principle of "regular and predictable" debt management. Although the new government is focused on reducing financing costs, any measures to cut issuance could contradict this core commitment.

Issuance Strategy Remains Stable

The Treasury reiterated in the statement that it is still assessing the possibility of increasing the auction sizes of coupon bonds and floating rate notes in the future, and will "focus on structural demand trends, as well as the potential costs and risks of various issuance methods."

Goldman Sachs strategists William Marshall and Bill Zu analyzed before the statement was released:

"Despite the current government's emphasis on measures to reduce financing costs, which has reignited market questions about whether a more aggressive adjustment of the issuance mix will be pursued to achieve this goal, we expect the Treasury will not take such actions at this time."

John Canavan, chief analyst at Oxford Economics, commented:

"The statement itself conveys a very robust signal, as the Treasury once again clarified that the auction sizes of coupon bonds and floating rate notes will remain unchanged 'at least in the next few quarters.'"

Morgan Stanley's strategist team pointed out in its refinancing preview report that the Federal Reserve's purchase program has reduced the risk of the Treasury "over-supplying" short-term Treasuries to the market beyond the private sector's absorption capacity.

However, the report also cautioned that the Federal Reserve's asset purchase path after April remains unclear, especially in the context of Kevin Warsh being nominated as the next Federal Reserve Chairman. Warsh's past public stance has leaned towards reducing the size of the Federal Reserve's securities portfolio, which could introduce variables into future policy paths