MNI UST Deep Dive: Refunding Preview - November 2025
Nov-03 16:11By: Tim Cooper
Fiscal Policy+ 2
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Refunding Preview: Fed To Bear Some Bill Burden
- Treasury’s first Refunding process of the 2026 fiscal year (Financing Requirements released Monday at 1500ET, Refunding announcement Wednesday at 0830ET) is likely to largely keep a steady approach to issuance policy, including leaving nominal Treasury coupon auction sizes unchanged for the 7th consecutive quarter.
- We also do not expect Treasury’s guidance on coupon issuance to change in this Refunding round ("Treasury anticipates maintaining nominal coupon and FRN auction sizes for at least the next several quarters.") Indeed, prospects for the next increase in coupon sizes continue to be pushed back rather than pulled forward. Our review of sell-side analysts’ expectations sees consensus on the next increase centering on late 2026 at the earliest, with some viewing 2027 as more likely.
- Despite large fiscal deficits (just under 6% of GDP in the just-ended FY2025), a ramp-up of bill issuance has instead borne the burden of meeting volatile financing requirements. That strategy will only be reinforced by the Federal Reserve’s decision to conclude balance sheet runoff as of December 1, with the proceeds of all maturing Treasuries to be reinvested, and the proceeds of maturing MBS set to be reinvested into Treasury bills. The latter will represent around $15-17B of bill purchases per month by the Fed.
- Upcoming issuance: The Refunding itself will be $58B in new 3Ys, $42B in new 10Y, and $25B in new 30Y for next week. November’s issuance schedule is set to see $324B in nominal Treasury coupon sales (unch from the equivalent month in the previous quarter), in addition to $19B in 10Y TIPS (unch from prior) and $28B FRN (unch) for a total of $371B.
- Borrowing Requirements: After borrowing $1T (est) in Jul-Sep in large part to fund the post-debt limit TGA cash rebuild, we anticipate a fairly steady outlook for the Oct-Dec quarter vs Treasury’s August financing estimates (release Monday at 1500ET).
