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Wall Street speculates: What is Besent's next move to "save U.S. Treasuries"?

Wall Street speculates: What is Besent's next move to "save U.S. Treasuries"?

华尔街见闻华尔街见闻2026/08/27 00:11
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By:华尔街见闻

Wall Street is focusing on the November 4th quarterly bond issuance plan, viewing it as a major unknown. Deutsche Bank expects an expansion in long-term bond buybacks, exceeding the $4 billion cap; Morgan Stanley anticipates an increase in short-term Treasury bills and short-term bond issuances; Citigroup has identified the reduction of 20-year Treasury auctions as a tail risk and has delayed expectations for large-scale auctions to 2028.

U.S. Treasury Secretary Scott Bessent has adopted a more proactive strategy in managing national debt, a shift that is disrupting the long-standing predictability of the U.S. bond market and prompting Wall Street to urgently simulate possible significant adjustments to government borrowing strategies in the coming months.

According to Bloomberg on August 26, following last week's announcement of a bond buyback program that Bessent called a "Treasury twist," market attention has swiftly shifted to the Treasury's quarterly debt issuance plan on November 4. Strategists at Wall Street investment banks such as Bank of America and Deutsche Bank warn that, for the $31 trillion U.S. Treasury market, this upcoming statement has become an unprecedented unknown.

Currently, mainstream Wall Street institutions expect that the Treasury may signal in November that future borrowing increases will be carried out through short-term Treasury bills and notes with shorter maturities, while further expanding the scope of buybacks to ease pressure on long-term yields. Some investment banks even point out that the possibility of directly reducing long-term bond issuance—a radical option—is on the rise.

As long-term Treasury yields hover at multi-year highs, the Treasury's deviation from the traditional "regular and predictable" approach injects new volatility into the market. Investors are facing a new era of U.S. debt management and are recalibrating their portfolio risk exposures accordingly.

November Issuance Plan Becomes Market's "Unknown"

Bessent's recent moves have disrupted the long-standing calm in U.S. policymaking. Meghan Swiber, Managing Director of U.S. Rates Strategy at Bank of America Corp, said the bond market is entering "a whole new world" for U.S. debt management.

Although Bessent currently rules out changes to the regular auction schedule and has stated that the Treasury will stick to the current timetable at least until the next issuance plan is announced, market expectations have already shifted.

Ian Lyngen, Head of U.S. Rates Strategy at BMO Capital Markets, pointed out that Bessent's actions have effectively turned the November issuance statement into a huge unknown. He emphasized that it is no longer possible to rule out a reduction in auction sizes.

Furthermore, the Treasury made subtle wording changes in its latest issuance guidance, stating that officials are assessing potential "changes" to future coupon and floating-rate note sales, rather than the previous guidance's term "increases." Analysts believe that this gives the Treasury more flexibility to reduce long-end bond issuances.

The Strategic Game: Expanding Buybacks and Shortening Duration

According to reports, as a first step of adjustment, the Treasury may focus on its buyback operations. A Deutsche Bank AG strategist team led by Steven Zeng believes that the Treasury could increase the size of its long-end operations above the initial suggested minimum of $400 million.

Officials may even keep the operation size confidential until the day before, thereby reducing the predictability of the buyback program and significantly raising the threshold for investors to short the long-end Treasuries.

However, an expanded buyback operation alone is unlikely to substantively change the government debt's maturity structure. Unlike the Federal Reserve, the Treasury can't create funds out of thin air to finance its buying activities. This means that buybacks must ultimately be funded by additional issuance (most likely short-term bills) or by drawing on the Treasury's cash balance.

Morgan Stanley noted that the Treasury's account can provide $8–20 billion in funding for buybacks.

Martin Tobias, Morgan Stanley rates strategist, stated that enlarged buybacks may merely be a transitional step until the November issuance plan is released. In his view, the true trigger for market volatility will be the means by which the Treasury shortens the weighted average maturity.

Tobias anticipates that the Treasury will gradually boost sales of shorter-dated notes while keeping long-dated bond sales stable. However, over the past week, the risk of directly reducing long-end bond auction sizes has increased.

Tail Risks and Controversy Over Cutting Long-Term Issuance

Some strategists are contemplating more radical reforms.

Citi has postponed its forecast for larger auctions until 2028 and raised the tail risk that the Treasury may ultimately cancel the 20-year bond. This maturity was reintroduced by former Treasury Secretary Steven Mnuchin under the Trump administration in 2020.

Despite its shorter maturity, the current yield on the 20-year Treasury is similar to the 30-year, which appears counterintuitive amid an upward-sloping U.S. yield curve.

Jason Williams, Citi's Head of U.S. Rates Strategy, stated that given the 20-year bond's poorer trading performance relative to the 10- and 30-year Treasuries, the Treasury is likely to trim auction sizes for the 20-year, which could be the biggest beneficiary of future actions.

However, reports note that there are real challenges to directly reducing long-term issuance. The Treasury stopped selling 30-year bonds in 2001, but at that time, the budget surplus reduced the government's funding needs. In today's high-issuance environment, eliminating any maturity would force other maturities to absorb the extra borrowing.

Kevin Flanagan, Head of Investment Strategy at WisdomTree, warned that cutting issuance at the long end while making up elsewhere appears mathematically very difficult. He said, if the Treasury goes down this path, the market would view it as manipulation, which could ultimately backfire.

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