STIR: Modest Dovish Reaction To ADP, Just Under 60bp Fed Cuts Priced For '26

ERU6 98.00/98.12 call spread vs. 97.87/97.75 put spread paper paid -0.5 on 25K, buying the call spread.

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• The latest Treasury Refunding policy statement out Nov 5 contained no change to guidance on maintaining auction sizes "for at least the next several quarters", as expected.
• However, Treasury made its biggest hint in quite a while that increases are on the foreseeable horizon: "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."
• While it certainly doesn't mean there will be increases in at least the next 2 and almost certainly 3 quarters, it is an unexpected development and seems consistent with MNI's baseline expectation that the next upsizing could be in a year from now (November 2026).
• Upcoming issuance: December’s issuance schedule is set to see $315B in nominal Treasury coupon sales (unch from the equivalent month in the previous quarter), in addition to $24B in 5Y TIPS and $28B FRN for a total of $367B.

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