TD analysts Priya Misra, Gennadiy....>

US TSYS/SUPPLY: TD analysts Priya Misra, Gennadiy Goldberg and Cheng Chen said

in November refunding announcement, Tsy "takes the first step" toward raising

"nominal coupon and 2-year FRN auction sizes starting from the February

refunding." They add "while Treasury did not increase issue sizes for 3s,10s or

30s today, they committed to raising nominal coupon and 2yr FRN auction sizes

starting from the February refunding. Until then we expect Treasury to fill any

additional funding needs via bills."

- They noted at 3/10/30Y auctions next week, there will be "steady coupon sizes

for now" as "Tsy kept issue sizes unchanged at $24bn, $23bn and $15bn for next

week's 3s, 10s and 30s auctions, respectively. Treasury has to raise an

additional $175B during fiscal year 2018 due to Fed portfolio runoff (assuming

current cap schedule). While it is not clear why Treasury decided to wait until

February (on Jan. 31) to increase coupon sizes, it may be a function of getting

more clarity on the deficit outlook due to the impending deficit financed tax

cuts. It could also be a function of the looming debt ceiling, which will create

added volatility in bill issuance."