U.S. Treasury Department's Quarterly Refunding Update

By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) – The U.S. Treasury Department announced that it does not anticipate increasing auction sizes for U.S. notes and bonds for "at least the next several quarters." This aligns with expectations as it revealed a quarterly refunding of $125 billion from November 2024 to January 2025.

The refunding aims to raise new cash of $8.6 billion from private investors and refund approximately $116.4 billion of privately-held Treasury notes and bonds maturing on Nov. 15.

The Treasury stated it will sell $58 billion in three-year notes, $42 billion in 10-year notes, and $25 billion in 30-year bonds next week. These figures match the sizes announced at the July refunding.

> “The refunding was pretty much close to our expectations,” said Angelo Manolatos, a macro strategist at Wells Fargo Securities, indicating the Treasury's guidance could be subject to interpretation. “We think that the Treasury is well-funded to meet its borrowing needs.”

For the fourth quarter, the U.S. Treasury plans to borrow $546 billion, which is $19 billion lower than the July estimate due to a higher cash balance at the beginning of the quarter, albeit partially offset by lower net cash flows.

The Treasury believes current auction sizes position it well to adapt to potential fiscal outlook changes and future redemption rates in the Federal Reserve System Open Market Account (SOMA), managed by the U.S. central bank.

Auction Sizes for TIPS to Increase

The Treasury plans to increase auction sizes for Treasury Inflation-Protected Securities (TIPS) moderately. It will maintain the November 10-year TIPS reopening auction size at $17 billion, increase the December five-year TIPS auction size by $1 billion to $22 billion, and raise the January 10-year TIPS new issue auction size by $1 billion to $20 billion.

For Treasury bills, offering sizes will be maintained through November. However, it anticipates issuing one or two cash management bills to meet cash needs by late November. Given estimates associated with the mid-month corporate tax date, short-dated bill auction sizes are expected to be moderately reduced in December, but will likely increase in January based on anticipated fiscal outflows.

Additionally, the Treasury plans weekly liquidity support buybacks of up to $4 billion in nominal coupon securities and will conduct two operations of up to $2 billion each for longer-maturity debt over the refunding quarter. It expects to buy up to $30 billion in off-the-run securities for liquidity support and $22.5 billion in shorter-dated securities for cash management purposes over the upcoming quarter.