U.S. Treasury to auction $125 billion next week, unchanged from last quarter

By Greg Robb

Treasury set to launch liquidity support buybacks

The refunding: The U.S Treasury Department on Wednesday said it would sell $125 billion in notes and bonds next week. That's the same as the size of the the auctions last quarter. The auctions will refund about $107.8 billion of privately-held Treasury notes and raise $17.2 billion in new cash.

The department will auction $58 billion of 3-year Treasury notes BX:TMUBMUSD03Yon May 7, $42 billion of 10-year notes BX:TMUBMUSD10Yon May 8 and $25 billion of 30-year bonds BX:TMUBMUSD10Yon May 9.

Big picture: Despite mounting worries about the sustainability of the U.S. budget deficit, the news in the short-term has been positive, economists said. Analysts are trimming their estimates for the deficit this fiscal year and the April 15 tax season was seen as somewhat stronger than expected, said Stephen Stanley, chief U.S. economist at Santander. Stanley trimmed his budget deficit estimate to $1.9 trillion this year from his forecast of $2 trillion three months ago.

Auction sizes: Treasury said that it doesn't see the need to increase coupon or floating-rate-note auction sizes "for at least the next several quarters" based on current projected borrowing needs. Prior to this quarter, Treasury had been increasing the sizes of coupon auctions since last August. Worries about Treasury auction sizes caused bond yields to rise last fall.

Treasury inflation-protected securities: Treasury said it plans to continue with incremental increases in Treasury Inflation Protected Securities auction sizes.

Bill issuance: The department said it expects to increase the 4-,6-and 8-week bill auction sizes in order to meet one-week cash needs around the end of May. After that, Treasury said it would return auction sizes to at or near the highs from February and March.

6-week Treasury bill becomes a 'benchmark bill': Treasury announced it plans to change the regular 6-week cash-management bill into part of the weekly bill issuance schedule going forward.

Buybacks: After months of preparation, Treasury is launching its buyback program. Treasury said through July it plans to conduct weekly Liquidity Support buybacks of up to $2 billion per operation in nominal coupon securities and up to $500 million per operation in TIPS.

-Greg Robb

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

05-01-24 0830ET

Copyright (c) 2024 Dow Jones & Company, Inc.