PremiumThe Next Treasury Put: Citi Expects Bessent To Slash Long-End Auctions, Maybe Kill The 20Y As AI Steals The Penion Bid
After the buybacks failed, Bessent's "Treasury put" needs a new trick. And according to Citi's head of US rates strategy Jason Williams, that trick will be unveiled at the November 4 quarterly refunding, when Treasury Secretary Scott "the House" Bessent is likely to cut the auction sizes for 20- and 30-year bonds, and could go as far as cancelling the 20-year altogether. Citi's base case is a $3 billion reduction per auction in both tenors, funded with even more T-bills, as Williams writes in the bank's latest US Rates Weekly, aptly titled "Pension plan for 20s?" (available to pro subs).
The reason, and the part that should be of most interest to regular readers, is who Citi thinks is eating Uncle Sam's lunch at the long end: the same culprit we have been pointing the finger at for the past year - the hyperscalers. Williams flags this Friday's Treasury dealer survey as a possible "bullish catalyst" if the department asks primary dealers whether long-end demand for Treasuries is being "partly cannibalized" by high-quality AI issuance.