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Citi Sees Treasury Leaning on T-Bills Amid Stable Coupon Sizes

Citi's latest analysis suggests that the U.S. Treasury will continue to rely heavily on T-bills, maintaining stable nominal coupon auction sizes through 2025. The Treasury's recent announcement confirmed unchanged coupon sizes for the upcoming quarter, aligning with Citi's expectations. "Treasury anticipates maintaining nominal coupon and FRN auction sizes for at least the next several quarters," Citi notes, indicating a preference for T-bills to manage deficits, which are projected to hover around $2 trillion annually. The report anticipates potential coupon hikes in Q1 2026, with a risk of earlier increases if deficits exceed $2.2 trillion. Additionally, the Treasury plans incremental increases in TIPS auction sizes, reflecting a strategy to maintain a stable share of TIPS in the marketable debt portfolio.