Quarterly Refunding: Announces USD 125bln refunding through July 2026 (prev. USD 125bln in Q1), to raise new cash of USD 41.7bln (prev. USD 34.8bln in Q1)
Nominal coupon and FRN financing (maintained as expected)
- US to sell USD 58bln of 3-year notes on 11th May, USD 42bln of 10-year notes on 12th May and USD 25bln of 30-year bonds on 13th May
Nominal Coupon and FRN financing (guidance maintained as expected)
- To keep coupon, floating rate note auction sizes unchanged for next several quarters.
- Treasury continues to evaluate potential future increases to nominal coupon and FRN auction sizes, with a focus on trends in structural demand and potential costs and risks of various issuance profiles.
TIPS (maintained)
- Treasury plans to maintain TIPS auction sizes at current levels: the May 10-year TIPS reopening auction size at USD 19bln, the June 5-year TIPS reopening auction size at USD 24bln, and the July 10-year TIPS new issue auction size at USD 21bln.
Cash Balance
- Treasury estimates that the size of the Treasury General Account (TGA) could peak at USD 1tln (plus or minus USD 50bln) in late July.
Buybacks (lowers cash management buybacks in 1mth-2-year, maintains liquidity support buybacks)
- Expects to purchase up to USD 38bln in off-the-run securities across buckets for liquidity support (unchanged) and up to USD 25bln in the 1-month to 2-year maturity bucket for cash management purposes (prev. USD 75bln in Q1).
Bills
- Treasury expects to further increase offering sizes of shorter-dated benchmark bills over the coming weeks and, in late-May, anticipates issuing a short-dated CMB to meet the peak liquidity needs at the end of May due to maturing coupon securities.
- Treasury expects to implement modest reductions to short-dated bill auction sizes during the month of June.
- Thereafter, in July, Treasury anticipates incrementally increasing bill auction sizes across the curve
20-year
- Treasury is modifying settlement timing for 20-year bond reopening auctions.
- From the reopening auction scheduled for June 16th, 20-year reopening auctions will settle on the Friday of the auction week, while new issues will continue to settle at month end.
TBAC Minutes
- Director Pietrangeli says while current issuance sizes are adequate to cover expected borrowing needs for the remainder of FY2026 (prev. Treasury is slightly overfunded in FY2026)
- The median primary dealer forecast for privately-held net marketable borrowing implies a USD 1.3tln funding shortfall in FY2027-28 based on current coupon auction sizes and bill supply (prev. saw USD 1.1trln).
- Debt Manager Jensen says dealers generally anticipate that nominal coupon auction sizes might next increase in early CY2027 (prev. late CY 2026 or CY early 2027), and expect Treasury to modify its forward guidance several quarters ahead of such a change.
Context
The U.S. Treasury's quarterly refunding announcement maintains issuance at USD 125 billion while increasing the target for new cash raised, signaling higher borrowing needs. This could imply future pressure on rates if demand fails to keep pace with increased supply, especially ahead of projected funding shortfalls in FY2027-28. The market will likely focus on the implications for liquidity and potential shifts in auction sizes moving forward.
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