QRA: Another (Final?) Coupon Upsizing, Buyback Announcement

A quick review of expectations for the upcoming Quarterly Refunding Announcement (0830ET/1330GMT) - our full preview is here (PDF link):

• Coupon Size Increases: Virtually all analysts whose previews we have seen expect a similar increase across coupon sizes focused on the shorter-end as seen in the November round. Recall that at the November refunding, sizes were upped $3B for 2Y and 5Y, $2B for 3Y and 10Y, $1B for 7Y and 30Y, and no change to 20Y. This would mean a Feb refunding month total of $306B in coupons (up $30B from Nov), and $324B in May. See table below.
• Low Financing Estimates Mainly Seen Impacting Bills: Treasury's announcement Monday that it projected $760B of net borrowing in the Jan-Mar quarter (a drop of $55B from the previous estimate) followed by $202B for the Apr-Jun quarter represented a downside surprise, on the order of $250-300B for the two quarters compared to the analyst expectations we'd seen. Overall though there was no impact on expectations for coupon upsizings at Wednesday's refunding announcement - though it probably reduced the chances of upside surprises. The main impact is seen on net bill issuance, which is seen as even more firmly negative going forward.
• Buybacks: Treasury is expected to announce the start of a buyback program which will include cash management repurchases and liquidity management operations (maximum $120B each annually - some details here). There is some debate about when the program will actually begin, however: either in the upcoming quarter, or the quarter starting in May.
• Guidance: It's widely expected Treasury will stick to its guidance from the November statement and say that it expects this quarter (Feb-Apr) to represent the last increase of coupon sizes.

Source: MNI