The 20-year has been the odd duck of the curve since its 2020 comeback, often yielding more than both the 10- and 30-year. That makes it a pricier way for the government to borrow at a time when overall interest costs are already elevated. Deutsche Bank's George Saravelos returned from New York client meetings hearing "mumblings of a coming suspension in 20-year Treasury issuance," while a Citigroup counterpart is telling clients to favor the 20-year over the 10-year on the chance of a "reduction, or perhaps cancellation, of the 20-year bond." The playbook echoes 2001, when the 30-year was shelved to save on interest costs after a surprise announcement that drew heavy criticism, only for the bond to be revived later. Steven Mnuchin - the Treasury secretary who reintroduced the 20-year in 2020 - said in 2024 that it ought to be eliminated, calling it "It's just costly to the taxpayer."
Treasury's quarterly refunding statement arrives Nov. 4, and a central question is whether Treasury Secretary Scott Bessent would pull the 20-year without a long on-ramp. He has already expanded buybacks of older securities in a bid widely seen as targeting high long-term rates. Padhraic Garvey, who runs Americas research at ING Groep NV, put it plainly: "If you wanted to do something, leave everything and cut the 20 year." He added, "Nobody likes the 20 years," but also said, "our baseline view is he leaves it as it is." BNP Paribas cautions that axing the 20-year "could be perceived as panic, and signal an exhaustion of the Treasury's toolkit, encouraging bond vigilantes," with "unintended consequences" like thinner liquidity. Treasury did not provide an immediate comment when asked.
An unloved maturity suddenly drawing interest is worth understanding. Market Briefs covers the Treasury curve free every weekday.
Longer-dated borrowing costs remain sticky. Last week's 10- and 30-year auctions drew decent demand but cleared at the highest yields since 2000, and long-end yields have climbed to peaks last seen in 2002 despite policy steps. Citi's Jason Williams says Bessent could cite weak pension-fund demand, perhaps tied to a pickup in long-maturity corporate issuance, as a rationale to scale back or cancel the 20-year.
As large tech companies finance AI buildouts with sizable long-maturity bond sales, their supply has been displacing Treasuries in portfolios overseen by managers of institutional assets, including pension funds. Concerns about inflation - tied to the Iran war's impact on energy - and the chance of additional Federal Reserve rate increases are prompting investors to demand higher yields. At Morgan Stanley Investment Management, Vishal Khanduja, who leads broad markets fixed income, framed it this way: "There is definitely a competition for capital that is happening." He also pointed to a longer-run move away from defined contribution pension setups that used to be big buyers of long Treasuries for liability needs.
Signals could show up fast. On Friday, Treasury will publish its customary survey for primary dealers ahead of the refunding, which sometimes includes special topics; in the past it even asked about stablecoin demand for bills. In August's refunding statement, officials tweaked their language to say they were assessing possible future "changes" in coupon and floating-rate note sales, instead of just "increases," effectively leaving room to trim 20- and 30-year supply.
Citi now projects cuts of $3 billion per auction for both those maturities, offset by more T-bill issuance. If Treasury pares long coupons, it may need to boost bills further or even consider a new instrument, such as a one year floating rate note linked to the Secured Overnight Financing Rate. Increasing issuance in the 2- to 5-year sector is another route.
Treasury will update its quarterly cash balance and borrowing estimates on Nov. 2, before the Nov. 4 announcement. One complication is optics: a major shift to the 20-year could undermine Treasury's reputation for regularity and predictability, particularly given that Bessent boosted buybacks only two weeks after the prior refunding. Moreover, when buybacks were unexpectedly doubled in mid-August, that move still didn't stop long-term yields from climbing to levels last seen in the early 2000s.
As Garvey put it, "the sensible thing" is steady issuance, but he also suspects Treasury is "in a very flexible mood" and willing to shift along the curve if it lowers costs.
For savers and retirees, the punchline is where yield and liquidity settle. If the long end is trimmed, you could see more short-dated paper and perhaps a new one year FRN tied to SOFR, which would reshuffle relative values across maturities. However this plays out, the shape of supply will steer where the best opportunities show up on the curve.
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