Should the US Scrap the 20-Year Treasury Bond?

In brief: Wall Street has revived the argument that the US Treasury should scrap the 20-year bond, the maturity it reintroduced in May 2020 to help fund pandemic borrowing. The security consistently trades at a yield premium to where its position on the curve implies it should, a liquidity cost borne by the taxpayer, and Citigroup now expects Treasury Secretary Scott Bessent to trim long-end auctions and possibly cancel the 20-year outright. The counterargument, voiced by BNP Paribas, is that removing it now could unsettle a jittery long-end market and push yields higher still.

The US 20-year Treasury bond is a nominal government security that sits awkwardly between the heavily traded 10-year note and the benchmark 30-year bond, and the debate in autumn 2026 is whether the Treasury should stop selling it. Twenty-five years to the month after the Treasury shocked investors by ending sales of the 30-year bond in 2001, the market is once again asking whether a long-dated maturity has outlived its usefulness. This time the candidate for the chopping block is the 20-year, a security that was absent from the curve for 34 years before its 2020 revival.

Why was the 20-year bond brought back in the first place?

The Treasury resurrected the 20-year in May 2020 for a plain reason: it needed to borrow an extraordinary amount, fast. Facing a record quarterly funding requirement during the first wave of the pandemic, the department wanted to extend the duration of its debt and add a fresh point of issuance capacity. The inaugural auction on May 20, 2020 sold $20 billion, and the Treasury promised to issue the bond in regular, predictable, benchmark size so that it would become a genuine liquidity point on the curve, as the New York Fed noted at the time.

That promise has only been half kept. The 20-year added capacity, but it never earned the deep, reliable demand that the 10-year and 30-year command. Its awkwardness is structural. It overlaps in duration with the long end without being the benchmark there, and many of the natural buyers of long-dated duration, pension funds and insurers, anchor their liabilities to the 30-year. The result is a security that often clears at a yield above what an interpolation between the 10-year and 30-year would suggest, a persistent concession the market demands for holding a less liquid instrument.

How much is the liquidity premium costing the Treasury?

The clearest recent illustration came at the September 15, 2026 auction, where it took a yield of 5.42 percent to place the full $13 billion on offer, the highest level since the maturity returned in 2020. The auction tailed by 2.0 basis points, meaning the bond cleared cheaper (at a higher yield) than the when-issued market had priced moments before, a textbook sign that demand fell short of expectation. By comparison, that same day the 10-year note drew the strongest coverage of the three coupons auctioned.

The climb did not stop there. Federal Reserve H.15 data put the 20-year constant-maturity yield at 5.64 percent on October 8, 2026, well above its trailing twelve-month average near 4.94 percent. Every basis point of concession at a tenor the government must roll indefinitely compounds into real interest expense. That is the heart of the fiscal argument: a security that chronically prices cheap is, in effect, a standing surcharge on federal borrowing.

The case is not new, and it has a notable author. In August 2024, Steven Mnuchin, the Treasury Secretary who created the modern 20-year bond, said it was time to kill it, arguing the maturity costs taxpayers money precisely because it trades at a premium to the rest of the curve. When the official who revived an instrument concludes it should be retired, the structural critique is hard to dismiss as mere market grumbling.

What is Citigroup expecting from Bessent?

The revived speculation has a concrete catalyst: the quarterly refunding cycle. Citigroup told clients in October 2026 that Bessent is likely to reduce long-dated auction sizes and could cancel the 20-year altogether. Jason Williams, the bank's head of US rates strategy, put the base case at a $3 billion cut to each 20-year and 30-year auction, with the shortfall made up by issuing more Treasury bills.

There is a political edge to that forecast. For years, Bessent and his allies criticized the previous Treasury leadership under Janet Yellen for leaning heavily on short-term bill issuance to hold down visible long-end supply. A pivot to the same playbook, cutting coupons and funding the gap with bills, would mark a notable reversal. Whether the 20-year survives as a smaller line item or disappears entirely is the specific question the November refunding is expected to answer.

Why might scrapping it backfire?

The counterargument is about timing and signalling, not structure. BNP Paribas warned in early October that axing the 20-year in the middle of a long-end selloff could exacerbate the very weakness it is meant to address, and the bank held to its forecast that the 30-year yield climbs toward 5.8 percent.

The mechanism runs through perception. Cutting long-dated supply when yields are already rising can read less as housekeeping and more as a flinch, an admission that the Treasury is struggling to place duration at acceptable cost. In a market already primed to watch for signs of fiscal strain, a move intended to save money at the margin risks being interpreted as capitulation to the bond market, which can lift term premiums across the whole long end rather than just at the 20-year point. The cheapness that makes the bond expensive to issue is the same cheapness that, if abruptly removed, could ripple outward.

What should institutions watch next?

The near-term signal is the November quarterly refunding statement, where the Treasury will either confirm the Citigroup thesis, trimming the 20-year or ending it, or leave the structure intact and defer the decision again. Beyond the headline, the detail that matters is the mix: a coupon cut funded by bills shortens the average maturity of the debt and reshapes the supply picture for anyone managing long-dated liabilities or structuring long-duration instruments against a Treasury benchmark.

The open question is whether the Treasury can retire a flawed security without the market reading the retreat as weakness. The 30-year precedent is instructive but inexact. That bond was cut in 2001 amid budget surpluses and brought back in 2006 when deficits returned, a reminder that issuance decisions made for near-term cost reasons can reverse when fiscal conditions turn. For institutions evaluating how programmable, auditable exposure to sovereign duration should be built and maintained, the lesson is that the composition of the benchmark itself is not fixed, and a credible issuance framework has to account for a curve whose constituent points can be added, shrunk, or removed with a single refunding statement. Issuant builds for exactly that kind of change: instruments whose terms and provenance stay legible even as the underlying reference market is redrawn.