The U.S. Department of the Treasury is offering $121 billion of Treasury securities to refund approximately $105.1 billion of privately-held Treasury notes maturing on February 15, 2024, with plans to gradually increase coupon auction sizes and conduct small-value buyback operations in April as part of its debt management strategy. The issuance includes a 3-year note, a 10-year note, and a 30-year bond, with auctions scheduled for February 6th, 7th, and 8th, respectively. Additionally, Treasury intends to maintain bill auction sizes at current levels into late March and evaluate the potential change of the regular 6-week CMB to benchmark status.
The Treasury Department's Quarterly Refunding announcements have caused significant market volatility, with longer-term Treasury yields surging and falling in response to the department's borrowing plans. The department announced a reduction in borrowing needs for Q1 and Q2, attributing it to higher tax receipts and a higher beginning balance in its Treasury General Account. However, the actual increase in marketable Treasury securities differs from the announced estimates, raising questions about market manipulation. The discrepancy in actual and announced increases in securities will be closely monitored, with potential implications for the marketable securities reaching $27.8 trillion by March 31.
The 10-year Treasury yield surged to 4.99% on Oct. 19, driven by factors such as increased borrowing needs by the Treasury Department, a sovereign downgrade by Fitch Ratings, a more hawkish Federal Reserve, and strong GDP growth. However, tax revenue for October shows a significant increase compared to the same period last year, with corporate taxes alone reaching $50.6 billion. The surge in tax revenue may help alleviate the fiscal 2023 budget deficit, which would have been around $2 trillion if not for the Supreme Court striking down student loan forgiveness. The Treasury's heavy borrowing needs are partly due to the Fed unloading up to $60 billion in Treasuries per month and the need to restore its cash balance after spending it down to avoid breaching the debt limit. Despite the increased borrowing, the Treasury aims to end Q4 with a cash balance of $750 billion.
The U.S. Department of the Treasury plans to offer $103 billion of Treasury securities to refund maturing notes and bonds, raising approximately $19 billion in new cash. Auctions for a 3-year note, 10-year note, and 30-year bond will take place in August, settling on August 15. The Treasury intends to gradually increase coupon auction sizes over the next quarter to align with borrowing needs. They also plan to increase auction sizes for 2-year, 5-year, 7-year, 10-year, and 30-year securities. Additionally, the Treasury plans to increase TIPS auction sizes and implement a regular buyback program in 2024. A small-value test auction will be conducted to test contingency auction infrastructure.
