US: Treasury Refunding Announcement

Wed Feb 04 07:30:00 CST 2015

The Treasury, as expected, scaled back the 3-year note in a $64 billion refunding that will pay down $16.6 billion of debt. The February refunding consists of $24 billion of 3-year notes, which is down $2 billion from the November refunding, with the 10-year and 30-year auction sizes unchanged, at $24 billion and $16 billion respectively. The Treasury now expects to hold sizes for coupon auctions at their current levels and plans to meet seasonal borrowing needs by adjusting auction sizes for T-bills and cash management bills. The Treasury said it will taper its cash balance to $30 billion by March 15, which is when the debt limit suspension ends, and will consider holding a higher level of cash afterward.

Each quarter the U.S. Treasury announces its funding needs for the next two quarters. The announcement includes which securities will be offered and the dates of their announcement, auction and settlement.

Bond market players pay attention to this release so that they know the degree of looming supply of Treasuries coming onto the market so that they can evaluate what appropriate yields might be for trading. Heavy supply coming onto the market suggests higher yields.