U.S. Treasury To Offer Record $112 Billion In Debt Next Week

The U.S. Department of the Treasury said on Wednesday that it will offer a record $112 billion of Treasury securities next week to refund about $49.5 billion of privately-held Treasury notes and bonds maturing on Aug. 15, 2020.

The new issuance will raise new cash of about $62.5 billion.

The new securities will comprise: a 3-year note in the amount of $48 billion, maturing Aug. 15, 2023; a 10-year note in the amount of $38 billion, maturing Aug. 15, 2030; and a 30-year bond in the amount of $26 billion, maturing Aug. 15, 2050.

The Treasury said the 3-year note will be auctioned on a yield basis at 1:00 p.m. EDT next Tuesday; the 10-year note will be auctioned on a yield basis at 1:00 p.m. EDT on Wednesday; and the 30-year bond will be auctioned on a yield basis at 1:00 p.m. EDT on Thursday.

All of these auctions will settle on Aug. 17, 2020.

Treasury explained that it continues to face “unprecedented borrowing needs” as a result of the federal government’s response to the COVID-19 outbreak. Consequently, Treasury has increased both bill issuance and coupon auction sizes, raising an unprecedented $1.462 trillion since May 1.

But in the next few quarters, Treasury expects borrowing needs to “moderate somewhat, but remain elevated on a historical basis.”

Over the July-September quarter, Treasury expects to borrow $947 billion (compared to the $2.753 trillion of realized borrowing in the April-June quarter).

“Treasury will continue to shift financing from bills to longer-dated tenors [length of time until a loan is due] over the coming quarters, using long-term issuance as a prudent means of managing its maturity profile and limiting potential future issuance volatility,” the department said.

However, the size of the next stimulus package remains unclear as the White House and congressional Democrats continue to negotiate terms of a new package.

Bloomberg reported that strategists at JPMorgan Chase & Co. recently calculated that the average maturity of Treasury debt has declined to its shortest length since 2011.

Priya Misra, head of global rates strategy at TD Securities, warned that an imminent increase in the supply of debt may put more pressure on the Federal Reserve to buy more Treasuries.

“All eyes are on the Fed,” she said. “We expect them to announce [an increase in purchases] in September,” Misra said.