Treasury May Increase 10Y, 30Y Auction Sizes, Wrightson Says
(Bloomberg) -- While it’s “too early to expect any concrete news” on ultra-long UST issuance in this week’s quarterly refunding announcement, Treasury might raise the size of all 10Y and 30Y auctions this qtr by $2b each “to lay the groundwork,” Wrightson ICAP chief economist Lou Crandall says in May 1 Money Market Observer.
- Treasury has been selling $23b 10Y followed by two $20b reopenings, and $15b 30Y followed by two $12b reopenings every quarter since February 2016
- Increases “would be advisable even if the Treasury had no plans to introduce a new ultra-long bond,” because of “the administration’s aggressive fiscal policy goals”
- Also, larger auction sizes would allow Treasury “to scale those offerings back when the new bond is launched,” blunting the market impact of the new offering
- At that point, Treasury could eliminate the second 30Y reopening each quarter and use the opening for an $10b-$12b ultra-long
- “Gross long-term issuance would actually fall slightly on a quarter-to-quarter basis when the new schedule took effect, but would remain above current levels”
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HALISTER1Source: BFW (Bloomberg First Word)
People Louis Crandall (Wrightson ICAP LLC)
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