JPMorgan Expects Treasury to Delay Bond Auction Guidance Change Past Midterms

The U.S. Treasury is likely to postpone any changes to its bond auction guidance until after the November midterm elections to avoid market disruption during a politically sensitive period, according to strategists at JPMorgan Chase & Co.

Political Timing Seen as Key Factor

Strategists led by Jay Barry warned in a note that altering guidance in next week’s quarterly refunding statement could unsettle the bond market. Such a move risks pushing long-term borrowing costs higher just before the election, at a time when they are already near their highest levels since President Donald Trump took office.

The JPMorgan team pointed to the current political environment, including lower administration approval ratings amid rising gas prices, as a reason for the Treasury to exercise caution. They noted that the subsequent quarterly refunding announcement is conveniently scheduled for one day after the midterm elections, suggesting any changes could be delayed until then, or potentially into 2027.

Recommended Guidance Adjustment

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For the purposes of prudent debt management, the JPMorgan strategists recommend that Treasury officials eventually modify their forward-looking language. They believe the Treasury should remove the phrase "at least" from its statement that auction sizes are expected to remain steady for "at least the next several quarters."

Removing this qualifier would provide the Treasury with greater flexibility to adjust auction sizes in the future as its financing needs change. However, introducing this change next week is seen as too risky for market stability.

Fiscal and Market Context

The analysis comes as JPMorgan projects a significant $3.7 trillion government funding gap over the next four fiscal years, underscoring the importance of managing future debt issuance. The strategists also noted that Treasury Secretary Scott Bessent has previously linked issuance plans to the level of market yields, highlighting the department's sensitivity to borrowing costs.