(Nov 4): JPMorgan Asset Management's Bob Michele has some advice for Treasury Secretary Scott Bessent: get rid of the 20-year bond.

"Nobody likes it," Michele, the firm's global head of fixed income, said ahead of the Treasury's announcement of its quarterly debt sales on Wednesday. "Why do you issue it? It made sense in another era. It doesn't make sense now."

The surge in long-dated yields to the highest since 2002 has fanned speculation the Treasury will pivot sales toward shorter-dated bills and notes in the coming months. Still, scrapping the 20-year bond outright remains a tail risk, with no dealer surveyed by Bloomberg forecasting such a move as their base case.

Michele, who was speaking on Bloomberg Surveillance, said the Treasury could rebalance sales away from the 20-year sector toward short-term bills, which mature in up to one year, supporting the long end of the curve.

The 20-year maturity has struggled relative to its long-dated peers since it was reintroduced in 2020, leading to intermittent calls for the Treasury to scrap it even before this year's run-up in yields.

An unexpected move to drop the maturity would represent a break from the Treasury's longstanding approach to "regular and predictable" communications when it comes to its debt-management policies. At its previous refunding statement in August, the Treasury said it envisaged no changes to auction sizes for "at least the next several quarters."

Since then, Bessent surprised traders with plans to boost buybacks of long-maturity Treasuries. While the revamp failed to bring lasting yield relief, it helped revive the debate around the merits of the 20-year Treasury. Strategists at BNP Paribas SA argued last month that such a move could have "unintended consequences," including higher yields or lower liquidity.

For Michele, there are much deeper pools of liquidity elsewhere for the Treasury to tap.

"Just say: 'it's done for, it was an orphan issue, we're going to just dump it into the front end where there's $8 trillion in money-market fund assets,'" he said. "We can finance ourselves there with ease."

Uploaded by Siow Chen Ming