There were no surprises in the Treasury's announcement of the quarterly refunding of $45 billion with a $62 billion issuance package that will raise $17.0 billion in new cash. As in the previous 4 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, with any changes in seasonal borrowing needs to be met by changes in regular T-bill auction sizes or by issuing cash management bills. The Treasury continues to expect T-bill supply to increase to a prudent level based on the current auction schedule. With no policy implications, the Treasury intends to conduct another test small-value buyback operation as well as a test small-value contingency auction operation during the quarter.
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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