The U.S. Treasury Department released the latest financing forecast data on Monday (November 2), adjusting its debt acquisition estimates for this year and next. The changes have affected the entire U.S. Treasury market, with traders closely watching the details of subsequent refinancing plans and anticipating potential shifts in bond auction arrangements.

The Ministry of Finance has adjusted its latest debt issuance forecast.

The U.S. Treasury Department stated that it expects to borrow $618 billion in the fourth quarter of this year, a figure $10 billion lower than the forecast released in August. The core reason for this change is that the initial cash balance was higher than previously projected, a positive factor that was partially offset by a decline in expected net cash flow. If the buffer effect of this higher initial cash reserve is excluded, the actual financing demand is actually $24 billion higher than the August estimate, with the current calculation model assuming a cash balance of $850 billion at the end of December. Meanwhile, the Treasury Department provided a financing outlook for the first quarter of 2027, projecting borrowing of $800 billion, based on a cash balance of $1 trillion at the end of March. Looking back at the actual financing situation in the third quarter, the Treasury borrowed a total of $742 billion, with a cash balance of $984 billion at the end of September. Compared to the August forecast, the total borrowing in the third quarter was higher than the initial estimate of $739 billion, but if the higher-than-expected cash balance at the end of the quarter is excluded, the actual financing amount was $30 billion less than expected.

The market is focused on Wednesday's refinancing plan, and the auction rules may be about to change.

The Treasury Department will release a detailed refinancing plan on Wednesday, drawing close attention from market participants who are looking for clues to determine whether the government intends to adjust the auction size of various bonds in subsequent quarters. Back in August, the US stance underwent a subtle shift, stating that it would continue to assess the possibility of adjusting the auction size of medium- and long-term interest-bearing bonds and floating-rate bonds. This differs significantly from the wording of the May refinancing statement, which mentioned the possibility of expanding bond issuance. This change in wording has fueled market speculation that the Treasury may reduce the auction amount of some long-term bonds, relying more on short-term Treasury bills and short- and medium-term interest-bearing bonds to fill the funding gap. Industry analysts generally believe that 20-year and 30-year bond auctions are the most likely to see reduced volume; the increased issuance plan for interest-bearing bonds is likely to focus on the 2- to 7-year maturity range. However, opinions on whether the key 10-year benchmark Treasury bond auction will continue to expand remain divided.

Treasury bond repurchase instruments have also attracted market attention.

In addition to the auction size, participants will also pay attention to changes in the Treasury's bond repurchase arrangements. The repurchase mechanism was originally established to maintain liquidity in the secondary market for U.S. Treasuries. Currently, the Treasury has raised the upper limit for single repurchases of long-term bonds, increasing the maximum amount per transaction from $2 billion to $6 billion.

Conclusion

This slight adjustment to the financing forecast is just the prelude. The refinancing plan that will be finalized on Wednesday will set the tone for the supply structure of US Treasury bonds in the short term. Changes in the supply of long-term bonds will also directly affect the pricing trend of the global bond market.