Citigroup expects the US Treasury to cut $3 billion from each 20-year and 30-year bond auction, shifting toward increased short-term bill borrowing instead. The investment bank also anticipates the 20-year bond auction could be canceled entirely, with an official announcement expected November 4. The Treasury has not yet confirmed any changes to its borrowing strategy.
Long-term borrowing costs have climbed to near multi-decade highs. The 10-year Treasury yield reached 5.24% and the 30-year yield stood at 5.60% as of October 9. On October 1, the 10-year yield touched its highest level since April 2002, prompting the Treasury to use its full $6 billion bond buyback limit to retire older long-term debt that same day.
The Math of Short-Term Borrowing
While short-term bills currently offer lower rates—the 3-month yield was 4.25% on October 9—they mature within a year, requiring frequent refinancing at prevailing market rates. This approach could expose the government to higher costs if rates remain elevated during rollover periods.
With the national debt exceeding $40 trillion and annual interest costs reaching approximately $1.1 trillion, strategists question whether the shift would meaningfully reduce borrowing expenses. Kevin Flanagan, head of investment strategy at WisdomTree, expressed skepticism about the approach, telling Bloomberg: "It seems to me mathematically very difficult to cut issuance at the longer end of the curve and make it up elsewhere." BNP Paribas strategists similarly doubt the change would lower overall government borrowing costs.
Implications for Markets
Rising Treasury yields have already influenced crypto markets. Bitcoin cooled when the 10-year yield reached its 2002-level high and subsequently traded at $84,030, up 1.2% in 24 hours as of the article's publication date, influenced by remarks from US President Trump.
Market participants will watch the Treasury's survey of bond dealers next week for early signals. The November 4 refunding announcement will clarify whether the government proceeds with shorter-term borrowing and how long-term yields respond to the change.
