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Analysts See Downside Risks To Bill Issuance (2/2)

US TSYS/SUPPLY

A few notable analyst reactions to the Treasury borrowing requirement announcement:

  • Wrightson ICAP: "The Treasury’s borrowing projections for the first half of this calendar year were much less pessimistic than ours – especially with respect to the April-June period...$65 billion below our projection of $825 billion... for Q2, however, the Treasury looks for a private market borrowing need of just $202 billion versus our forecast of $410 billion. The $208 billion difference has massive implications for bill supplies. Given our Q2 buyback assumptions, our forecast implies that net bill issuance between the April 15 tax date and June 30 will be only modestly negative at around -$60 billion. At first glance, the Treasury’s numbers would seem to imply a net bill paydown over that period in excess of $250 billion...Treasury bill offering sizes are likely to be on hold for some weeks to come."
  • JPMorgan: "Cumulatively, netting out differences in assumptions on the cash balance and QT pace, Treasury projects $210bn less financing needs than we had estimated, with the bulk of the difference in the April-Jun quarter....At face value this would suggest downside risks to our $1.675tn budget deficit forecast for FY24, and by association, downside risks to Wednesday morning’s refunding announcement. However, we acknowledge that our quarterly financing estimates are sensitive to assumptions surrounding the seasonality of the budget deficit... the current auction calendar will be insufficient to meet Treasury’s borrowing needs over the medium term and we continue to expect one more round of increases, identical to those announced in November."
  • CIBC: "An unexpected budget surplus, on top of a very high run-rate of coupon supply, means the Treasury is raising more cash than expected, particularly as rates fall. This will allow the U.S. Treasury to slow down its currently high pace of bill issuance, and reduce the total bill stock which is above-average at present. The implication for coupon issuance is still not entirely clear, though we continue to look for less long-end issuance at tomorrow’s announcement – so far, the Quarterly Refunding Announcement (QRA) is turning into a flattener."
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A few notable analyst reactions to the Treasury borrowing requirement announcement:

  • Wrightson ICAP: "The Treasury’s borrowing projections for the first half of this calendar year were much less pessimistic than ours – especially with respect to the April-June period...$65 billion below our projection of $825 billion... for Q2, however, the Treasury looks for a private market borrowing need of just $202 billion versus our forecast of $410 billion. The $208 billion difference has massive implications for bill supplies. Given our Q2 buyback assumptions, our forecast implies that net bill issuance between the April 15 tax date and June 30 will be only modestly negative at around -$60 billion. At first glance, the Treasury’s numbers would seem to imply a net bill paydown over that period in excess of $250 billion...Treasury bill offering sizes are likely to be on hold for some weeks to come."
  • JPMorgan: "Cumulatively, netting out differences in assumptions on the cash balance and QT pace, Treasury projects $210bn less financing needs than we had estimated, with the bulk of the difference in the April-Jun quarter....At face value this would suggest downside risks to our $1.675tn budget deficit forecast for FY24, and by association, downside risks to Wednesday morning’s refunding announcement. However, we acknowledge that our quarterly financing estimates are sensitive to assumptions surrounding the seasonality of the budget deficit... the current auction calendar will be insufficient to meet Treasury’s borrowing needs over the medium term and we continue to expect one more round of increases, identical to those announced in November."
  • CIBC: "An unexpected budget surplus, on top of a very high run-rate of coupon supply, means the Treasury is raising more cash than expected, particularly as rates fall. This will allow the U.S. Treasury to slow down its currently high pace of bill issuance, and reduce the total bill stock which is above-average at present. The implication for coupon issuance is still not entirely clear, though we continue to look for less long-end issuance at tomorrow’s announcement – so far, the Quarterly Refunding Announcement (QRA) is turning into a flattener."