Quarterly Refunding Review: Press conference at 15:00BST/10:00EDT

Auction sizes were left unchanged, in line with expectations, while the Treasury also maintained its forward guidance, continuing to state that “based on current projected borrowing needs, Treasury anticipates maintaining nominal coupon and FRN auction sizes for at least the next several quarters.” Some desks expected a tweak to the language, with Barclays looking for guidance to shift to “at least the next few quarters.” Although no change was made at this meeting, the TBAC minutes imply the guidance could be adjusted as soon as next quarter.

The TBAC minutes highlighted that current issuance sizes remain sufficient to meet expected borrowing needs through the rest of FY2026. However, the median primary dealer forecast now implies a USD 1.3tln funding shortfall in FY2027-28 under current auction sizes, up from USD 1.1tln in the prior quarter’s estimates. Dealers generally continue to expect nominal coupon auction sizes to begin increasing in early CY2027 (prev. late CY2026 or early CY2027), and the TBAC highlights that dealers expect the Treasury to modify its forward guidance several quarters ahead of such change. 

On cash balances, Treasury maintained its end-June cash balance target at USD 900bln and now sees the TGA peaking around USD 1tln in late July. In March, Treasury projected a peak around USD 1.025tln by late April before declining through May.

On buybacks, Treasury continues to guide to up to USD 38bln in purchases across buckets for liquidity support purposes. However, in the 1-month to 2-year sector, Treasury now expects to purchase just USD 25bln for cash management purposes, down from USD 75bln in the Q1 announcement.

Elsewhere, Treasury announced that beginning with the June 16th 20-year reopening auction, reopenings will settle on the Friday of auction week rather than month-end, while new issues will continue to settle at month-end. Treasury said the change is designed to reduce repo specialness around reopenings, citing primary dealer feedback.

On the Large Position Report (LPR) call, Treasury said it intends to issue a call sometime in the next three months, with the last call having taken place in September 2025. The LPR process requires major holders to disclose unusually large positions in a specific Treasury security.

The refunding documents did not include any details regarding a potential shift in the 7-year auction schedule from the current monthly new issues to a quarterly structure consisting of one new issue followed by two reopenings, similar to the current format used for 10-, 20-, and 30-year securities. Wrightson noted ahead of the QRA that dealer feedback on the proposal had been broadly positive and continues to believe there is a good chance the Treasury adopts the change later this year. The consultancy added debt managers may provide further colour today on whether the proposal remains under consideration. We may hear more about it in the upcoming press conference. 

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