Citibank: Bezent may “wave” long-term bonds next month. The issuance of 20-year US bonds may be directly cancelled

The Zhitong Finance App learned that Citi published a research report saying that US Treasury Secretary Scott Bessent is likely to lower the scale of tendering and issuance of long-term treasury bonds, and may even completely cancel the issuance of 20-year treasury bonds.

Jason Williams, head of US interest rate strategy at Citibank, said that the bank's benchmark forecast is to cut each auction of 20-year and 30-year treasury bonds by 3 billion US dollars and make up for the gap by increasing the issuance of short-term treasury notes. This adjustment is expected to be announced in the Ministry of Finance's next quarterly refinancing announcement on November 4.

In Friday's report, the Citibank strategist suggested that clients lay out 20-year treasury bonds to outperform 10-year treasury bonds transactions, citing the expectation that “the issuance of 20-year treasury bonds will be reduced or even cancelled.”

The first sign of this change may come from a questionnaire to traders scheduled for next Friday. Williams said that if the Ministry of Finance asks major financial institutions whether demand for long-term bonds is being “partially encroached upon” by the bond issuance of high-quality hyperscale cloud computing companies, then this questionnaire is expected to become a “bullish catalyst” for these transactions.

He wrote, “Although we don't think the supply of such investment-grade bonds has affected the overall level of interest rates, we do think pension funds may be allocating more long-term investment-grade bonds than before.”

Currently, the debate on Wall Street continues to heat up over what measures Bezent will take to suppress US bond yields, which have been around a decades-high level. Earlier this week, BNP Paribas strategists said they were skeptical about whether such measures could effectively reduce the US government's financing costs.