Treasury’s Quarterly Refunding Statement Released

The U.S. Department of the Treasury is offering $125 billion of Treasury securities to refund approximately $116.4 billion of privately-held Treasury notes and bonds maturing on November 15, 2024. This issuance will raise new cash from private investors of approximately $8.6 billion. The securities are:

– A 3-year note in the amount of $58 billion, maturing November 15, 2027;

– A 10-year note in the amount of $42 billion, maturing November 15, 2034; and

– A 30-year bond in the amount of $25 billion, maturing November 15, 2054.

The 3-year note will be auctioned at 1:00 p.m. ET on Monday, November 4, 2024. The 10-year note will be auctioned at 1:00 p.m. ET on Tuesday, November 5, 2024. The 30-year bond will be auctioned at 1:00 p.m. ET on Wednesday, November 6, 2024. All these auctions will take place on a yield basis and will settle on Friday, November 15, 2024.

The balance of Treasury financing requirements over the quarter will be met with regular weekly bill auctions, cash management bills (CMBs), and monthly note, bond, Treasury Inflation-Protected Securities (TIPS), and 2-year Floating Rate Note (FRN) auctions.

NOMINAL COUPON AND FRN FINANCING

Treasury believes its current auction sizes leave it well positioned to address potential changes to the fiscal outlook and to the pace and duration of future SOMA redemptions. Based on current projected borrowing needs, Treasury does not anticipate needing to increase nominal coupon or FRN auction sizes for at least the next several quarters.

The table below presents, in billions of dollars, the actual auction sizes for the August to October 2024 quarter and the anticipated auction sizes for the November 2024 to January 2025 quarter:

Treasury plans to address any seasonal or unexpected variations in borrowing needs over the next quarter through changes in regular bill auction sizes and/or CMBs.

TIPS FINANCING

Given the intermediate- to long-term borrowing outlook and the structural balance of supply and demand for TIPS, Treasury believes it would be prudent to continue with incremental increases to TIPS auction sizes in order to maintain a stable share of TIPS as a percentage of total marketable debt outstanding. Over the November 2024 to January 2025 quarter, Treasury plans to maintain the November 10-year TIPS reopening auction size at $17 billion, increase the December 5-year TIPS reopening auction size by $1 billion to $22 billion, and increase the January 10-year TIPS new issue auction size by $1 billion to $20 billion.

BILL ISSUANCE

Given current fiscal forecasts, Treasury expects to maintain the offering sizes of benchmark bills through November and, in late-November, anticipates issuing one or two CMBs to meet its cash management needs at that time. Given projections for receipts associated with the mid-month corporate tax date, Treasury expects to implement modest reductions to short-dated bill auction sizes during the month of December. Thereafter, over the course of January 2025, Treasury anticipates increasing bill auction sizes based on expected fiscal outflows.

As always, Treasury will continue to evaluate near-term borrowing needs and assess additional adjustments to bill auction sizes as appropriate.

6-WEEK BILL BENCHMARK

Treasury will continue with weekly issuance of the 6-week CMB while it makes necessary operational and systems changes in order to smoothly transition the 6-week CMB to benchmark status. Additional implementation details, including the likely timing of the first benchmark auction, will be provided at the February 2025 refunding.

BUYBACKS

Today, Treasury is releasing a tentative buyback schedule for the upcoming refunding quarter. As the schedule indicates, Treasury plans to conduct weekly liquidity support buybacks of up to $4 billion per operation in nominal coupon securities. In longer-maturity buckets, Treasury plans to conduct two operations, each up to $2 billion, over the refunding quarter. Treasury also plans to conduct two operations, each up to $500 million, in each of the TIPS buckets.

Treasury initiated cash management buybacks in September and, as indicated in the tentative buyback schedule, anticipates conducting additional cash management buybacks in December 2024. Amounts purchased in cash management buybacks temper reductions to bill auction sizes that would otherwise occur over the same timeframe.

Treasury anticipates that over the course of the upcoming quarter it will purchase up to $30 billion in off-the-run securities across buckets for liquidity support and up to $22.5 billion in the 1-month to 2-year bucket for cash management purposes.

SMALL-VALUE CONTIGENCY AUCTION OPERATION

Treasury believes that it is prudent to regularly test its contingency auction infrastructure. Treasury’s contingency auction system has been used routinely over the last several years to conduct both mock auctions and live small-value test auctions. Sometime over the next three months, Treasury intends to conduct a small-value test auction using its contingency auction system. Details about this test will be announced at a later date.

This small-value test auction should not be viewed by market participants as a precursor or signal of any pending policy changes regarding Treasury’s existing auction processes.

The next quarterly refunding announcement will take place on Wednesday, February 5, 2025.