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PRIMER: The US Treasury Quarterly Refunding Announcement is due at 13:30GMT/08:30EST

Newsquawk Staff ·

BORROWING

  • On Monday, the Treasury said it expects to borrow USD 574bln in Q1 (exp. 550bln; prev. 578bln), with an end cash balance of USD 850bln; it expects to borrow USD 109bln in Q2, with an end cash balance of USD 900bln.
  • In Q4, the Treasury borrowed USD 550bln and ended the quarter with a cash balance of USD 873bln. At its last QRA in November, the Treasury estimated borrowing of USD 569bln, and assumed an end-of-December cash balance of USD 850bln.
  • The USD 20bln in lower privately-held net marketable borrowing resulted primarily from higher net cash flows, partially offset by the higher-than-assumed end-of-quarter cash balance. Excluding the higher-than-assumed end-of-quarter cash balance, actual borrowing was USD 42bln lower than announced in November.
  • Barclays expects the Treasury to reaffirm guidance to keep nominal coupon and FRN auction sizes unchanged for several quarters, implying no coupon increases in 2026. The bank says this would create a roughly USD 700bln funding gap, which would largely be met via T-bill issuance, with the Fed absorbing about USD 500bln, leaving manageable private issuance in 2026 but rising pressures in 2027.

AUCTION SIZES

  • 3s, 10s, 30s auction sizes expected to be left unchanged at USD 58bln, USD 42bln, and USD 25bln, respectively.
  • In November, the Treasury said nominal coupon and FRN financing were anticipated to be maintained for at least the next several quarters. but it has begun to consider future increases to nominal coupon and FRN auction sizes, with a focus on evaluating trends in structural demand and assessing potential costs and risks of various issuance profiles. By the middle of January 2026, it anticipated increasing bill auction sizes based on expected fiscal outflows.

BUYBACKS

  • With regards to buybacks, in November it anticipated that it will purchase up to USD 38bln in off-the-run securities for liquidity support, and up to USD 25bln in the 1-month to 2-year bucket for cash management purposes.

NEW ISSUES

  • The Treasury is exploring SOFR-indexed FRNs, having sought dealer feedback and previously consulted on the idea. Barclays says that demand appears strong, given growth in agency SOFR FRNs and money fund holdings. Barclays believes the market could absorb at least USD 200bln in first-year issuance, making a 2027 launch plausible to help address future funding needs.
  • Elsewhere, traders will be watching the 7yr sector; in the Treasuryʼs Primary Dealer Meeting Agenda for Q1, it said that it was considering shifting the 7yr note to a quarterly new-issue cycle with two reopenings, similar to the 10yr; this would reduce the number of 7yr CUSIPs over time, resulting in fewer but larger individual issues.

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