Bessent will likely cut US long bond sales next month, says Citi
Earlier this week, strategists at BNP Paribas SA said they were skeptical that such a move would be effective at lowering government borrowing costs.
The U.S. Treasury Secretary, Scott Bessent, may reduce the size of auctions for long-term government bonds or even cancel sales of 20-year debt, according to Citigroup Inc. Analysts predict a potential $3 billion reduction per auction for both 20- and 30-year bonds, funded by additional T-bill issuance. This announcement is expected at the Treasury Department's next quarterly refunding on November 4.
Citigroup's head of US rates strategy, Jason Williams, suggested at the end of Friday that clients should position for 20-year bonds to outperform 10-year notes, anticipating a possible reduction or cancellation of the 20-year bond. A survey of dealers slated for next Friday could serve as a "bullish catalyst" for this trade. While there is no concrete evidence that alternative-grade (IG) supply from hyperscalers has affected overall rates, some strategists believe pension funds might be increasingly inclined towards long-end IG bonds.
Previously, strategists at BNP Paribas SA expressed skepticism about the effectiveness of such a move in lowering government borrowing costs.
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