**Market Brief: Treasury Keeps Auctions Steady, But Deficit Fears Loom** **Core Update** The U.S. Treasury officially announced it will maintain current auction sizes for bonds and notes over the next several quarters, meeting broad market expectations. The Quarterly Refunding package totals **$125 billion**, split across **$58 billion** in 3-year notes, **$42 billion** in 10-year notes, and **$25 billion** in 30-year bonds. **The Surprise Factor** While the headline number was stable, the release of the Treasury Borrowing Advisory Committee (TBAC) minutes triggered immediate volatility. Primary dealers revealed a startling estimate of a **$1.1 trillion** funding shortfall for the 2027-2028 fiscal years. This projection significantly exceeds prior consensus and highlights growing structural deficit concerns. **Market Reaction** Yields reacted swiftly to the minutes. The benchmark **10-year Treasury yield** hovered near **4.28%**, while the yield curve steepened. The spread between 2-year and 10-year notes widened to approximately **70.8 basis points**, signaling that investors are demanding a higher premium for holding longer-term debt in anticipation of heavier supply ahead. **Outlook Shift** Sentiment has shifted regarding the timeline for future issuance. Investors who previously expected steady sizes for longer now anticipate auction increases could begin as early as **late 2026** or the start of **2027** to plug the projected funding gap. The focus remains on how the Treasury will navigate this potential supply wall without disrupting market liquidity.