Goldman Sachs anticipates that the U.S. Treasury Department will raise its near-term borrowing estimate when it publishes financing figures at 3:00pm on Monday, May 4. The investment bank has calculated marketable borrowing for the second quarter at $185 billion, up from the $109 billion projection that the Treasury provided at its February refunding meeting.
Goldman Sachs further expects that the Treasury will leave nominal coupon and Treasury Inflation-Protected Securities (TIPS) auction sizes unchanged for the current quarter. Based on those assumptions, the bank calculates a net bill supply of negative $121 billion for the second quarter.
The bank also identified two specific items that warrant attention when the Treasury releases its refunding documents at 8:30am on Wednesday, May 6. First, Goldman flagged potential adjustments to how the Treasury communicates about future increases in auction sizes. Second, the bank noted that discussion of the effects of ongoing changes to bank regulation on demand for Treasury securities will be important.
Following modest downward revisions to deficit projections, Goldman Sachs has shifted its timing for when coupon auction sizes are likely to rise. The bank now expects the Treasury to begin increasing coupon auction sizes starting in February 2027, a delay of one quarter compared with the firm’s earlier projection. Goldman continues to view any eventual increases as likely to be gradual and limited in scope, targeted at the 2-to-7 year maturity range.
Goldman Sachs said that the later start to coupon increases introduces uncertainty around the Treasury’s longstanding guidance that current auction sizes are likely to remain in place for at least the next several quarters. The bank judged that some modification of that guidance or related language is more likely than not. Goldman cited the effect of the Supreme Court’s IEEPA ruling on borrowing needs, and the Treasury Borrowing Advisory Committee’s indication that current projections could support coupon size increases in fiscal year 2027, as factors shaping this view.
Market participants will therefore be watching both the revised financing figures due May 4 and the refunding documentation on May 6 for any changes in Treasury communication and for commentary on how regulatory changes are affecting demand.