Goldman Sachs Do Not Expect Coupon Auction Sizes To Be Cut Until 2022

Goldman Sachs note that "while we think auction size cuts are coming irrespective of the eventual size of the fiscal packages being negotiated, we do not think they will happen at the August refunding. Our base case is that the reduction will start in February 2022, though there is a good case for starting later this year as well. We expect the cuts will mean net coupon issuance of roughly $2.2tn and $1.5tn in FY22 and FY23 respectively. And while we see across the board cuts to nominal coupons (with perhaps a bit more for 7s and 20s), we do think there's a strong case for Treasury to continue to add to TIPS issuance sizes into next year."

• "We think there's a fairly good chance that Treasury will get the TGA close to its $450bn target by the end of the month given likely outlays and net settlements. Beyond that point, how far the extraordinary measures will last depends on the interpretation of the current debt limit legislation, and ranges from early October to late November. Irrespective of the interpretation however, we think early October will be a key date, given the need to pass a continuing resolution (that will likely be combined with debt limit language), although the less generous interpretation could translate to a more volatile bill supply and cash balance path."