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Liquidity Management A Focus At Next Refunding


Some market attention on the Treasury's Primary Dealer Meeting Agenda ahead of quarterly refunding announcement on Nov 2 (MNI Brief here). The part that's gotten the most attention is on potential Treasury buybacks - see below for reference.

  • As the Treasury notes, it's suggested previously that it could conduct buybacks, which would mostly be done to shore up liquidity in some off-the-run securities, for example, as opposed to a change in net issuance.
  • As such, few implications per se for the broader market, but could have a positive impact on off-the-run issues vs on-the-run counterparts. However, not seeing much of a reaction to the release when comparing current benchmarks to off-the-runs.
  • Some clients had asked us following the dramatic headlines on this article whether this was tantamount to considering another QE (Reuters: TREASURY ASKS MAJOR BANKS IF IT SHOULD BUY BACK SOME U.S. GOVERNMENT BONDS TO IMPROVE MARKET LIQUIDITY") , and it certainly is not.
  • Liquidity management will be one of the elements to watch for in the upcoming refunding announcement, though and it is a coincidence that it will come out close to the November 2 FOMC decision.. US Treasury

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