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Free AccessMNI POLICY: US Treasury Shifts to Longer-Dated Debt Offerings
Next week's refunding is USD112B (USD48B 3Y, USD38B 10Y, USD26B 30Y)
Treasury Department
The U.S. Treasury will increase debt auctions by USD132 billion and shift financing to longer-dated securities as the department adjusts to pay for the ballooning deficit, and is keeping extra cash on hand as Congress debates further stimulus.
The department announced Wednesday it would sell USD112 billion in notes and bonds next week, as part of its regular quarterly refunding, up from USD96 billion in the last quarter.
The department will auction USD48 billion in 3-year Treasury notes on August 11 and USD38 billion in 10-year notes on August 12. The government will also sell USD26 billion in 30-year bonds on August 13.
"In the coming quarters, Treasury anticipates borrowing needs to moderate somewhat, but remain elevated on a historical basis, in part due to an assumption regarding additional legislation," Brian Smith, Treasury's deputy assistant secretary for federal finance, said in a statement.
The announcement comes two days after Treasury said it will borrow USD947 billion this quarter, with an additional USD1.216 trillion in the fourth quarter.
INCREASED AUCTION SIZES
Over the next three months, Treasury anticipates increasing the sizes of the 2-, 3-, and 5-year note auctions by USD2 billion per month.
Treasury anticipates increasing the size of the 7-year note auction by USD3 billion per month over the next three months.
Treasury also announced increases of USD6 billion to both the new and reopened 10-year note auction sizes, and increases of USD4 billion to both the new and reopened 30-year bond auction sizes starting in August.
| 2-year | 3-year | 5-year | 7-year | 10-year | 20-year | 30-year | FRN | |
| July-20 | 48 | 46 | 49 | 44 | 29 | 17 | 19 | 24 |
| August-20 | 50 | 48 | 51 | 47 | 38 | 25 | 26 | 22 |
| September-20 | 52 | 50 | 53 | 50 | 35 | 22 | 23 | 22 |
| October-20 | 54 | 52 | 55 | 53 | 35 | 22 | 23 | 26 |
Treasury also intends to modestly increase auction sizes for floating-rate notes while leaving auction sizes for inflation-protected securities unchanged.
FATTER CASH BALANCE
The swelling deficit and the uncertainty of its path has led Treasury to increase cash on hand. That balance was USD1.75 trillion on August 3 after reaching a record USD1.83 trillion July 27. Those figures are up from USD400 billion in early March.
Analysts have said a key assumption in bill forecast is the Treasury's cash balance, adding that they expect it to drop sharply in the third quarter.
"While Treasury expects its cash balance to decline over the quarter, the extent of the decline will depend on several uncertain factors, including the pace of outflows under current law and the potential for additional legislation." the department said in a statement.
Congress continues to debate another spending measure that could be USD1 trillion or more.
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.