MNI POLICY: U.S. Treasury Seeks Dealer Input on TIPS Demand

The U.S. Treasury has asked primary dealers for their input on debt projections and whether the department should increase TIPS auction sizes.

The Treasury on Friday said it also asked if dealers believe the Federal Reserve's new flexible form of average inflation targeting will have an impact on TIPS demand. The queries will be the focus of discussion between the Treasury and primary dealers ahead of their quarterly meeting later this month.

Widespread economic devastation arising from the coronavirus pandemic has spurred the Treasury to ramp up its debt issuance to record levels to support a variety of government stimulus programs.

Treasury also asked for dealers to give a detailed answer on what has driven the recent increase in bank demand for Treasuries and whether that has been temporary or permanent and whether it is influenced by increased bank deposits, the level of bank reserves, temporary relief from the Supplementary Leverage Ratio provided by bank regulators, or other factors.

The Treasury's next quarterly refunding announcement will take place on November 4.