Halister News

(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”