The US government plans to rely more on treasury note financing, which will delay expectations of an increase in long-term debt issuance and bring a more relaxed financial environment to the market. US Treasury Secretary Scott Bessent said this week that it is unreasonable to increase long-term bond sales at current interest rates. Bank of America analysts now anticipate that the US Treasury will maintain a stable long-term debt auction scale until the 2027 fiscal year, which is expected to increase starting in February 2026. The government needs to increase the scale of debt auctions for various periods to finance the widening budget deficit. ⑸ However, compared with increasing long-term treasury bonds, increasing the issuance of short-term notes will lower interest rates, widen long-term swap spreads, and make the financial environment more relaxed. The Bank of America estimates that increasing reliance on treasury notes could reduce the long-term absorption of the market by about 1 trillion US dollars by the 10-year equivalent value, which is equivalent to a drop of about 30 basis points in 10-year Treasury yields. This strategy is different from the Federal Reserve's quantitative easing to stimulate the economy by buying treasury bonds, but it has a similar impact on the financial environment. However, the increase in the issuance of notes may pose a risk of financing pressure. Analysts said that note supply will show seasonal fluctuations, and supply may peak from July to November this year and February to March next year. This may “disrupt the financing market and require intervention by the Federal Reserve.”

The US government plans to rely more on treasury note financing, which will delay expectations of an increase in long-term debt issuance and bring a more relaxed financial environment to the market. US Treasury Secretary Scott Bessent said this week that it is unreasonable to increase long-term bond sales at current interest rates. Bank of America analysts now anticipate that the US Treasury will maintain a stable long-term debt auction scale until the 2027 fiscal year, which is expected to increase starting in February 2026. The government needs to increase the scale of debt auctions for various periods to finance the widening budget deficit. ⑸ However, compared with increasing long-term treasury bonds, increasing the issuance of short-term notes will lower interest rates, widen long-term swap spreads, and make the financial environment more relaxed. The Bank of America estimates that increasing reliance on treasury notes could reduce the long-term absorption of the market by about 1 trillion US dollars by the 10-year equivalent value, which is equivalent to a drop of about 30 basis points in 10-year Treasury yields. This strategy is different from the Federal Reserve's quantitative easing to stimulate the economy by buying treasury bonds, but it has a similar impact on the financial environment. However, the increase in the issuance of notes may pose a risk of financing pressure. Analysts said that note supply will show seasonal fluctuations, and supply may peak from July to November this year and February to March next year. This may “disrupt the financing market and require intervention by the Federal Reserve.”