The U.S. Treasury is widely expected to keep the sizes of its coupon auctions unchanged for a ninth straight quarter when it issues updated financing guidance on May 4 and follows with its refunding announcement on May 6. The refunding will set planned auction sizes for three-year and 10-year notes and 30-year bonds - the instruments known on Wall Street as coupon issuance, which carry stated interest payments as opposed to short-term, non-interest-bearing Treasury bills.
Market participants say the two releases offer the Treasury an opportunity to prepare investors for any eventual move toward larger coupon auctions later this year, though it is not guaranteed the department will signal such a shift.
Short-term guidance and market expectations
Jan Nevruzi, U.S. rates strategist at TD Securities in New York, said markets will be looking for direction on how the Treasury intends to manage coupon issuance. "Right now, they say that they’re well-suited to maintain auction sizes steady for the next several quarters, which means it’s unlikely that you get any changes before 2027," Nevruzi said. He expects the Treasury to begin increasing auction sizes in February of next year. Citi, by contrast, anticipates higher auction sizes in mid-2027.
Tariff refunds add urgency
Recent judicial and fiscal developments are reshaping near-term government cash flows and have added urgency to questions about longer-term funding. The most immediate swing factor is the Supreme Court decision that limited the use of the International Emergency Economic Powers Act for broad tariffs. Up to $166 billion could be returned to importers as a result.
JPMorgan estimates that roughly $127 billion of that total will be eligible for electronic refunds, and it expects the first meaningful payments to arrive in June and July after a 60- to 90-day processing window. The bank forecasts about $30 billion in refunds to be paid in 2026 with the remaining roughly $90 billion pushed into 2027. Taking these developments into account, JPMorgan raised its fiscal deficit forecast for this year to $1.98 trillion from a prior estimate of $1.875 trillion.
Analysts note the timing of the payments complicates the Treasury’s usual issuance playbook. June typically sees a drop in bill issuance as corporate tax receipts bolster the Treasury General Account - the Treasury’s bank account at the Federal Reserve - and the second quarterly estimated tax payment is due on June 15.
Quarterly borrowing outlook
Against that backdrop, attention has shifted to the Treasury’s expected borrowing profile. JPMorgan projects net marketable borrowing of $149 billion in the April-June quarter, assuming an end-June Treasury General Account balance of $900 billion consistent with the Treasury’s February guidance. For the July-September quarter, JPMorgan sees borrowing climbing to $792 billion as refund payments and seasonal cash dynamics converge.
Citi’s outlook is similar. The bank expects private funding needs of $126 billion for the current quarter and $735 billion for the third quarter. Citi also flagged a risk that second-half financing needs could rise further if defense outlays increase.
Where issuance increases might land on the curve
Dhiraj Narula, U.S. rates strategist at HSBC, said he expects any increase in coupon issuance to be concentrated at the front end and the belly of the curve - maturities up to seven years - with only modest increases at the long end, defined as maturities of 10 years or more.
Short-term Treasury bills have largely underpinned the government’s funding needs in recent years owing to strong demand for bills. Narula cautioned that a prolonged reliance on T-bills leaves government funding costs more exposed to swings in short-term interest rates. He warned waiting too long to raise coupon auction sizes could necessitate larger catch-up increases later that might push up term premium and steepen the yield curve. Term premium refers to the extra yield investors demand to hold longer-term debt.
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As the Treasury prepares its May announcements, markets will weigh the timing and magnitude of tariff refunds, seasonal cash flows, and evolving forecasts for deficit and borrowing needs when recalibrating expectations for future coupon issuance.