JPMorgan Chase strategists led by Jay Barry expect the U.S. Treasury to postpone changes to its auction guidance in the upcoming quarterly refunding statement, arguing that altering the language now could unsettle markets in the run-up to November's midterm elections.
The team highlighted an estimated $3.7 trillion funding gap across the next four fiscal years. They urged Treasury officials to consider revising their public guidance on issuance to better reflect prudent debt management practices. Specifically, the strategists recommended removing the words "at least" from the Treasury's phrase that states auction sizes are expected to remain steady for "at least the next several quarters."
JPMorgan's analysis warns that implementing that wording change next week may disturb bond markets ahead of the midterms and thereby risk pushing long-term borrowing costs higher. The strategists note that those borrowing costs are already trading close to their highest levels since the start of President Donald Trump's tenure in office. Treasury Secretary Scott Bessent has previously tied issuance plans to prevailing yield levels.
The calendar also factors into the recommendation. The November quarterly refunding announcement is scheduled to fall one day after the midterm elections. Given that timing and what the JPMorgan team describes as current political dynamics, they said any substantive alteration to Treasury guidance could be delayed until 2027.
In addition to the fiscal and market considerations, the strategists pointed to political sentiment dynamics. Rising gasoline prices related to the Iran war have been cited as a contributor to weaker approval ratings for the Trump administration in recent months, a factor the team views as part of the broader context around timing and market sensitivity.
While the strategists advocate for clearer issuance language to underpin sound debt management, they caution that immediate modification of that wording around next week's refunding could have destabilizing effects on the bond market given the proximity to the midterm vote.