Borrowing needs have increased substantially due to the federal government's response to Covid 19 outbreak
The US treasury is out with its US quarterly refunding numbers
- US to sell 2 billion of 3 year notes on May 11
- US to sell 32 billion of 10 year notes on May 12
- US to sell 22 billion of 30 year bonds on May 13
- The expectations was for $91 billion.
- US yields have moved higher after the announcement with the 30 year yield up 4.1 basis points. The 10 year yield is up around 4 basis points. The 2 year yield is relatively steady as the yield curve steepens.
Other comments from the US treasury:
- over the next quarter cash balance will likely remain elevated as it seeks to maintain prudent liquidity
- needs have increased substantially due to federal government's response to Covid 19 outbreak
- treasury expects to begin to shift financing from bills to longer dated tenors over the coming quarters
- treasury intends to increase auction sizes across all nominal coupon tenors over the May to July quarter
- increasing coupon issuance will be larger and longer tenors
- intends to modestly increase auction sizes for floating-rate notes, tips will remain unchanged
- changes in coupon andFRN auction sizes will result in an additional $154 billion of issuance during the May – July quarter compared to the February – April quarter
- treasury over the upcoming quarter will continue to supplement its regular benchmark bill financing with regular issues of cash management bills
- treasury says anticipates the initial offering size of the new 20 year bond will be $20 billion and that the auction will take place on May 20
- treasury continues to explore the possibility of issuing a floating-rate note index to the secured overnight financing rate
Of late we are also seeing more corporate borrowing with Apple and Starbucks two companies that stick in my mind.. The good news is global investors continue to look toward the US asset classes to park funds. Nevertheless the demands from the US treasury are huge and will continue that way.
