

US Rates: Previewing the August refunding announcement
Jul 23, 2025
Phoebe White, Senior U.S. Rates Strategist at J.P. Morgan, and Eric Childs, Head of NA Rates Trading, dive into crucial insights about the upcoming Treasury refunding announcement. They discuss expected changes in T-bill issuance and the fiscal implications on investor behavior. The duo analyzes market adjustments and the influence of global trends on term premiums, especially how long-end yields remain elevated. Expect a deep dive into the implications of central bank responses and anticipated funding challenges for the next few years.
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Treasury's Cash Rebuild Impact
- Treasury needs to rebuild its cash balance, driving current quarter borrowing to $1.087 trillion, higher than last quarter's estimate.
- The market should absorb heavy T-bill issuance well, with Treasury leaning on bills as a shock absorber for financing swings.
Large Funding Gap Ahead
- Treasury faces a nearly $5 trillion funding gap from fiscal years 26 to 29, requiring multi-quarter coupon auction size increases starting February 2026.
- This likely means a tweak in forward guidance on unchanged auction sizes will occur then.
Market Positioning Reflects Supply Outlook
- The market discounts upcoming Treasury supply, with front-end asset swaps pricing in the TDA rebuild and supply expected this quarter.
- Real money holds a benchmark curve tilt; macro hedge funds are more focused on swaps and back-end steeper positions.