US Treasury seen holding coupon sizes steady, leaning on bills as tariff refunds loom

NEW YORK - The U.S. Treasury is likely to keep bond-auction sizes steady for a ninth straight quarter when it announces financing plans on Monday and Wednesday, but a looming wave of tariff refunds is renewing investor focus on whether and when the government will increase its issuance of longer-term debt.

The Treasury will release its quarterly financing estimates on May 4, followed by the refunding announcement on May 6. The refunding outlines government financing plans for the second and third quarters, including auction sizes for three-year and 10-year notes as well as 30-year bonds. Those auctions cover what is known on Wall Street as coupon issuance - the sale of securities with coupons showing their interest rates, as opposed to non-interest-bearing, short-term bills.

Analysts say Treasury officials could use the event to prepare markets for a shift toward larger coupon auctions later this year, although it is not certain that they will.

"We're just looking for guidance on what the Treasury can do with coupons," said Jan Nevruzi, U.S. rates strategist at TD Securities in New York. "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 expects the Treasury to start increasing auction sizes in February next year. Citi expects higher auction sizes in mid-2027.

FOCUS ON TARIFF REFUNDS

Recent legal and fiscal developments are altering near‑term government cash flows and adding urgency to longer‑term funding questions, some analysts say.

The most immediate swing factor is the fallout from the Supreme Court's decision overturning the use of the International Emergency Economic Powers Act (IEEPA) for broad tariffs. As much as $166 billion could be returned to importers.

JPMorgan estimates that roughly $127 billion of that total will be eligible for electronic refunds, with the first meaningful payments likely to land in June and July after a 60‑ to 90‑day processing window. The bank expects about $30 billion in refunds to be paid in 2026 and the remaining $90 billion or so in 2027.

Taking into account these factors, JPMorgan raised its fiscal deficit forecast this year to $1.98 trillion from $1.875 trillion previously.

The tariff refund payment in the summer complicates Treasury's usual issuance playbook, analysts said. June typically brings a decline in bill issuance as corporate tax receipts bolster the Treasury General Account, the Treasury's bank account at the Federal Reserve. The second quarterly estimated tax payment is due on June 15.

BORROWING ESTIMATES

Against that backdrop, attention is turning to Treasury's borrowing profile. JPMorgan projects net marketable borrowing of $149 billion in the April–June quarter, assuming an end‑June TGA of $900 billion, consistent with Treasury's February guidance.

For the July–September quarter, borrowing is seen jumping to $792 billion as refund payments and seasonal dynamics converge.

Citi's forecasts are similar, with expected private funding needs of $126 billion for the current quarter and $735 billion for the third quarter. The bank sees risks that second‑half financing needs will increase if defense outlays creep higher.

Dhiraj Narula, U.S. rates strategist at HSBC, said once the Treasury starts increasing coupon issuance, he expects the bulk of changes will be concentrated at the front end and belly of the curve - maturities as long as seven years - with only modest raises at the long end, or maturities of 10 years or more.

T-bill issuance has underwritten the Treasury's funding needs over the past few years given solid bill demand. But Narula said a prolonged reliance on T-bills would leave government funding costs increasingly exposed to volatility in short-term interest rates.

Waiting too long to boost auction sizes "might risk the need for larger catch-up increases, which could drive up term premium and ... steepen the curve," he said. Term premium refers to the additional yield investors demand to hold longer-term debt.

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Colin Barr and Edmund Klamann)

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This story was originally published May 1, 2026 at 4:22 PM.