Treasury Maintains Long-Term Debt Sales, Sees Rise in 2018

The U.S. Treasury Department maintained longer-term debt sales for the seventh straight quarter at $62 billion and said it anticipates announcing an increase in coupon-bearing securities in February to help meet rising funding needs.

The department will sell $24 billion in three-year notes on Nov. 7, $23 billion in 10-year notes on Nov. 8 and $15 billion in 30-year bonds on Nov. 9, it said Wednesday in its quarterly refunding announcement of longer-term debt sales. That will raise new cash of about $19.3 billion.

Treasury said its borrowing needs will increase as the Federal Reserve reduces its balance sheet and given the outlook for wider fiscal deficits. At the next quarterly refunding announcement, the Treasury said on Wednesday it expects to announce gradual increases in nominal coupons and two-year floating rates notes in February. These changes will probably results in a “stabilization of the weighted average maturity of debt outstanding at or around the current levels.”

The magnitude and allocation of increases to auction sizes will depend in part on projections for the fiscal outlook, as well as feedback from market participants, according to the statement.

Treasury plans to address changes in any seasonal borrowing needs over the next quarter through changes in regular bill auction sizes as well as cash management bills.

The Treasury Borrowing Advisory Committee, in the minutes of its latest meeting also released Wednesday, said its badysis shows a focus on increased issuance in 2-year, 3-year and 5-year maturities “is attractive.”

Dealer Outlook

Most primary dealers indicated expectations prior to Wednesday’s refunding statement that Treasury would lift coupon-bearing debt auction sizes by the first quarter of 2018 if it refrained from doing so this year. A rise in longer-term debt sales would be the first increase since November 2009. The debt-ceiling constraints and the slow start last month of the Fed’s balance-sheet runoff gave Treasury room to stick with bills for now, they said.

In the statement Wednesday, Treasury said the government will be able to meet its payment obligations through January, using extraordinary measures if Congress doesn’t extend the current debt-limit suspension period or raise the cap by Dec. 8.

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