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Citi Sees Steady T-Bill Reliance as Treasury Maintains Coupon Sizes

Citi's latest analysis reveals that the U.S. Treasury will maintain its current nominal coupon auction sizes through the first quarter of 2025, aligning with expectations for stable issuance patterns. The Treasury's decision to keep coupon sizes unchanged, while marginally increasing the 5-year TIPS auction by $1 billion, reflects a strategy to lean on T-bills amid a backdrop of high yields and a steep curve. "Treasury anticipates maintaining nominal coupon and FRN auction sizes for at least the next several quarters," Citi notes, suggesting comfort with a growing T-bill share, potentially rising from 20% to 25% over time. The report anticipates no significant changes until February 2026, with a risk of earlier adjustments in November 2025, contingent on deficit developments. As the Treasury plans to borrow $815 billion in Q1 2025, Citi highlights the importance of the debt ceiling, expected to be addressed by mid-June, in shaping future financing strategies.