US Treasury Sees $1.1 Trillion Gap in Funding, No Change in Issuance Scale - 2026-02-04

[Para 1: The Lead] The U.S. Treasury confirms no adjustment to long-term bond issuance scale for at least several quarters, aligning with market expectations. However, the Treasury's Borrowing Advisory Committee (TBAC) meeting minutes reveal a $1.1 trillion funding gap from 2027 to 2028, sparking market concern. Despite unchanged issuance scale, including $580 billion of 3-year, $420 billion of 10-year, and $250 billion of 30-year bonds, the market reacts to the potential for future scale adjustments. [Para 2-3: Supporting details & Context] According to TBAC meeting records, despite current issuance levels, market participants anticipate a slight surplus in 2026 fiscal year funding, leading to a $258 billion reduction in privately held bonds' borrowing estimates for 2026-2028. However, most traders expect a potential increase in coupon bond issuance as early as late 2026 or early 2027. The yield curve steepens post-issuance, reflecting market unease over the funding gap and expectations of earlier scale adjustments. The 2-year and 10-year Treasury yield spread expands to 70.8 basis points, higher than the previous day's 69.3 basis points, indicating cautious investor sentiment toward long-term bonds.