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Treasury’s New Debt Plan Hints at Bigger Bond Sales on the Horizon

Nov 05, 2025 08:38:00 -0500 by Karishma Vanjani | #Treasuries

The U.S. Treasury may start issuing more long-term bonds. (ANGELA WEISS/AFP via Getty Images)

Key Points

The Treasury Department said it has begun considering increases to the amount of longer-term debt it offers at auctions.

Given the large size of the government’s fiscal deficit, the market has long anticipated that Treasury—the financier to Washington—would hint at future increases to bond-sale sizes. In the quarterly refunding announcement on Wednesday morning, the Treasury finally addressed the question.

“Looking ahead, Treasury has begun to preliminarily consider future increases to nominal coupon and FRN auction sizes, with a focus on evaluating trends in structural demand and assessing potential costs and risks of various issuance profiles,” the release said.

The last time the Treasury announced an increase to sizes of its long-term bond sales was in February of last year. That increase took effect in April 2024.

An increase in the supply of bonds, as opposed to shorter-dated debt, is no small matter. About three-fourth of U.S. Treasury debt is made up of longer-dated debt. More supply would weigh on prices, meaning yields would rise. Bond prices and yields move in opposite directions.

Higher yields would push up interest costs for the government at a time when payments are already elevated. The Treasury paid $970 billion in the year ended September, or roughly $7,300 per household, as interest on debt. The higher the cost, the more the U.S. could be seen as unable to handle its debt burden. It is a vicious cycle.

A senior Treasury official said that there is uncertainty about when increases would happen and that the department is trying to provide the best guidance it can to market participants in the interim. The Treasury Borrowing Advisory Committee—a group that provides guidance for the Treasury whose members include market heavyweights such as Goldman Sachs and Vanguard—believes that increases are warranted in the fiscal year beginning October 2026.

For the current quarter, the Treasury isn’t raising the amounts of debt it auctions. It said it plans to maintain these sizes “for at least the next several quarters.”

Auction sizes for short-term debt, or Treasury bills, are expected to be modestly reduced in December given projections of corporate taxes, and then increased in January. These are “seasonal type changes” based on the government’s borrowing needs, the senior Treasury official said.

By late afternoon, the iShares 20+ Year Treasury Bond ETF had fallen 1.1% while the 10-year Treasury yield gained 0.074 percentage points to 4.163%. The 10-year Treasury yield helps determine the cost of a variety of loans for consumers, including home mortgages.

Yields jumped in part as “a gut reaction to the additional guidance on coupons, which served as a reminder that coupon auction sizes won’t remain unchanged forever and that near-term cuts are unlikely,” wrote Blake Gwinn, rates strategist at RBC Capital Markets. Coupon-bearing securities is another way to refer to Treasuries maturing in two to 30 years.

While the Treasury news ignited the sell-off, ideas that some of President Donald Trump’s tariffs could be ruled illegal fueled it further. Arguments at the Supreme Court suggested a decision against the levies could be coming.

That would not only reduce the revenue the Treasury receives from tariffs, it could also force the government to issue refunds to companies. A senior Treasury official had said that if tariff revenue were to go down, borrowing could be affected.

A pair of reports this morning that showed healthy private-sector hiring and a pickup in the services side of the U.S. economy also contributed to the sell-off. A stronger economy makes the safety of Treasury bonds less appealing.

Write to Karishma Vanjani at karishma.vanjani@dowjones.com.