Citi has published a research note stating that U.S. Treasury Secretary Scott Bessent will likely reduce the auction sizes of long-term government bonds, and may even completely eliminate 20-year Treasury issuance.

Jason Williams, Citi's head of U.S. rates strategy, said the bank's base case is a $3 billion reduction per auction for both 20-year and 30-year Treasuries, with the gap filled by increasing short-term T-bill issuance.

This adjustment is expected to be announced at the Treasury's next quarterly refunding announcement on November 4. In a Friday report, the Citi strategist advised clients to position for 20-year Treasuries to outperform 10-year Treasuries, citing expectations of a "reduction, and possibly even cancellation, of 20-year Treasury issuance."

The first signal of such a change could come from a survey of dealers planned for next Friday. Williams said that if the Treasury asks major financial institutions whether demand for long-term bonds is being "partially cannibalized" by high-quality hyperscaler corporate bond issuance, that questionnaire could serve as a "bullish catalyst" for the trade.

He wrote: "While we do not believe this type of investment-grade bond supply has affected the overall level of interest rates, we do think pension funds may be allocating more to long-term investment-grade bonds than in the past."

Currently, debate is intensifying on Wall Street over what steps Bessent will take to suppress Treasury yields hovering near multi-decade highs. Earlier this week, BNP Paribas strategists said they were skeptical about whether such measures could effectively lower the U.S. government's financing costs.