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Treasury Secretary Steven Mnuchin heads to a meeting on the coronavirus relief bill last month.
Agence France-Presse/Getty Images
The refunding: As part of its regular quarterly refunding, Treasury announced it would sell $122 billion in notes and bonds next week. This is up from $112 billion last quarter.
The department will auction $54 billion in 3-year Treasury notes TMUBMUSD03Y, 0.175% on Nov. 9 and $41 billion in 10-year notes TMUBMUSD10Y, 0.768% on Nov. 10. The department will also sell $27 billion in 30-year bonds TMUBMUSD30Y, 1.530% on Nov. 12.
Big picture: Government spending has surged in order to combat the coronavirus pandemic, with the annual deficit of more than $3.1 trillion in the last fiscal year.
Since April 1, Treasury raised a record $3.2 trillion.
Steve Stanley, chief economist at Amherst Pierpont, said Treasury’s strategy has been to fund the massive spike in financing needs in the short term mainly in the bill market with a cascade of cash management bills, and then to add coupon auction sizes over time to “term out” funding.
“Treasury raised so much in cash management bills that it not only funded the deficit, but also swelled the cash balance to a record of over $1.8 trillion,” he said.
Increase in auction of coupon securities: Treasury said it would increase the size of auctions of coupon and floating-rate notes by $105 billion during the November-January period.
The size of the 2-, 3- and 5-year notes will increase by $6 billion by the end of January. The department will increase the 7-year note auction by $9 billion by the end of January.
The new and reopened 10-year note auction size will increase by $3 billion and the 30-year bond auctions by $1 billion.
The new and reopened 20-year bond will be increased by $2 billion. The department will increase the size of reopening floating rate note auctions by $2 billion.
The size of the next new issue 2-year floating rate note auction in January will rise by $2 billion to $28 billion.
SOFR-indexed floating rate note: Treasury said it hasn’t made a decision on potential issuance of a floating rate note linked to the Secured Overnight Financing Rate.
Increase in inflation-indexed securities: Treasury said it will gradually increase the size of the TIPS auction sizes over 2021 calendar year. “We expect total gross issuance of TIPS to increase by $10 billion to $20 billion,” the department said.
