FOREX: US Dollar Reverses Steadily Lower, EURUSD Re-Approaches 1.14

Treasury Sec Bessent has generally expressed little urgency to shift gears on issuance strategy – even if longer-duration is the longer-term goal - and his department will probably want to wait to see how multiple areas of uncertainty play out, including the anticipated Republican tax cut legislation and the debt limit impasse.

• The lack of urgency may seem unusual given that the federal government continues to run large (6+% of GDP) deficits. After the $1.83T federal deficit posted in the 2024 fiscal year (Oct-Sep), the 2025 fiscal year deficit is shaping up to be in the same neighborhood.
• The deficit through the first half of the FY is $200+B wider than the prior year’s, but tax collections in April, month 7, have been strong, and tariffs are providing a modest tailwind to cash flows ($20B/month appears to be the prevailing assumption). That helps reduce the urgency to increase coupon sizes to meet financing requirements, with bills the preferred means of funding adjustments for now. (Stronger-than-expected cash flow has also helped push back “x-date” expectations from around July/August to later in the summer/September/October, per multiple notes we have read.)
• Monday's financing estimates were a fairly neutral development - there was no sign of fiscal deterioration vs the pre-existing baseline evident in the Apr-Jun quarter (the estimated borrowing requirement ex-TGA cash rebuild fell, though that was partly attributable to Fed QT tapering), and Jul-Sep was fairly steady vs the prior quarter despite some expectations that there would be a large increase in borrowing.
• At this point, Treasury isn’t expected to raise the size of its coupon offerings until 2026 at the earliest. Consensus continues to shift later on this: prior to the February refunding announcement, consensus was Q3/Q4 2025, then moved to Q4 2025/Q1 2026; now, consensus looks more like between Q1 2026 and Q3 2026.
• Upcoming issuance: As noted, increases in nominal coupon sizes are not expected for the upcoming quarter. ($1B increases in 5Y and 10Y TIPS sizes are largely expected however.) May is set to see $324B in nominal Treasury coupon sales, in addition to $18B in 10Y TIPS and $28B FRN for a total of $370B – a joint-post-Oct 2021 high.

• RES 4: 0.8781 2.236 proj of the Mar 3 - 11 - 28 price swing     
• RES 3: 0.8768 High Nov 20 ‘23
• RES 2: 0.8624/0.8738 High Apr 21/ High Apr 11 and the bull trigger
• RES 1: 0.8557 High Apr 28 
• PRICE: 0.8508 @ 16:24 BST Apr 29 
• SUP 1: 0.8487 Intraday low
• SUP 2: 0.8477 61.8% retracement of the Mar 28 - Apr 11 rally  
• SUP 3: 0.8459 50-day EMA  
• SUP 4: 0.8415 76.4% retracement of the Mar 28 - Apr 11 rally

EURGBP traded lower Monday, marking a continuation of the current bear cycle. Note too that the move down cancels the doji reversal signal on Apr 25. Sights are on 0.8477, a Fibonacci retracement point where a break would strengthen the bearish theme. It is still possible that short-term weakness is corrective. A reversal and a resumption of gains would open 0.8738, the Apr 11 high and bull trigger. 

From our preview of Wednesday's quarterly Refunding announcement, which is at 0830ET (PDF link): Recent market volatility has reduced the possibility that Treasury will adjust its guidance that it will keep nominal coupon auction sizes unchanged for “at least the next several quarters”, as changing this would signal an intention to increase bond supply in the near future. 

• A change could be unnecessarily disruptive for the long end of the Treasury curve which has already been under duress amid a tariff-related market selloff, and as we note below there doesn’t appear to be much conviction by the Treasury Secretary that an upsizing is necessary by year-end – such a shift would probably necessitate a change in guidance this month.
• That said, some analysts eye potential for a softening of this language in this round. In the MNI Markets Team’s view, any change would be seen with significant concern by market participants. Recall in February’s round, there had been split opinion over the guidance changing or not – when it wasn’t changed, it spurred a modest relief rally in Treasuries. This time, expectations are low, and a change could trigger an outsized reaction.
• There is no expectation that Treasury will change the composition of coupon auction sizes at this Refunding.

Future Coupon Upsizing: Treasury Secretary Bessent said in February that a terming out of the Treasury’s maturity profile was "a long way off, and we're going to see what the market wants". With the Treasury curve steepening sharply since then with term premia rising amid tariff-related market volatility, it doesn’t seem like an opportune time to test the waters. Additionally, fiscal dynamics don't yet make an upsizing urgent, and indeed some analysts think the next move for coupon sizes could be down, and not up. For now MNI is penciling in nominal coupon issuance rises in February 2026’s refunding – see table below.