There were no surprises in the Treasury's announcement of the quarterly refunding, a $62 billion total that will raise $13.8 billion in new cash. As in the previous 2 quarters, the refunding package consists of $24 billion in 3-year notes, $23 billion in 10-year notes and $15 billion in 30-year bonds. The Treasury plans to maintain coupon issuance at current levels over the coming quarter based on current fiscal estimates, with any changes in borrowing needs to be met by changing the size of regular T-bill auctions or by issuing cash management bills. A small-value test auction using the Treasury's contingency auction system is planned for August 17, with details to be announced on August 15.
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.
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