On Monday, 28th July, US Treasury will release its quarterly financing estimates, followed by its full refunding announcement on Wednesday, 30th July. We expect Treasury nominal coupon and FRN auction sizes to remain unchanged for another quarter. We expect about $600-650bn in net bill issuance during Q3 to replenish the TGA to an $850bn steady state by the end of the quarter. Our view is that nominal coupon auction sizes will remain unchanged until August 2026 before growing gradually from there. Such an approach would allow for controlled growth in the bill share and lower the WAM of total debt outstanding towards the long-term average. We think liquidity support buybacks are likely to rise by 50-100%. We don’t think a change in the guidance of “maintaining nominal coupon and FRN auction sizes for at least the next several quarters” is necessary. Hence, Treasury might opt to pair a duration friendly innovation—larger buybacks and potentially a more explicit tolerance of a higher bill share or intent to lower the overall WAM—with language that offers a bit more flexibility.
