15.4 C
New York
Saturday, June 10, 2023

U.S. Treasury to introduce new two-month bill, increase coupon sizes

U.S. Treasury to introduce new two-month bill, increase coupon sizesU.S. Treasury to introduce new two-month bill, increase coupon sizes

WASHINGTON (Reuters) – The U.S. Treasury said on Wednesday it will introduce a new benchmark 2-month bill starting in October 2018 and also increase the size of its debt auctions in the coming months.

The measures are to deal with a rising budget deficit and fill gaps left by the Federal Reserve continuing to reduce its massive bond portfolio.

Rising federal borrowing, while not entirely a surprise, rekindled some concerns about its effect on the bond market, lifting the 10-year Treasury yield () to 3 percent for the first time since mid-June.

“Some of the selling in the bond market can be attributed to the auction sizes continuing to increase,” said John Canavan, market strategist at Stone & McCarthy Research Associates in New York.

The new 2-month bill will settle on a Tuesday, unlike the department’s traditional settlement day of Thursday, Deputy Assistant Secretary for Financial Markets Clay Berry said in a statement.

He said the first auction for the 2-month bill will be announced on Oct. 15, 2018.

Treasury said that it will increase the sizes of the 2-,3- and 5-year note auctions by $1 billion per month over the next three months. It will also increase auction sizes by $1 billion for each of the next 7- and 10-year notes and 30-year bond auctions in August and hold auction sizes steady at that level through October.

It will also boost the auction size of its next 2-year floating rate note issue by $1 billion.

The U.S. fiscal deficit is expected to hit $833 billion this year, up from $666 billion in the budget year ended last September, according to the Treasury’s June budget report.

The U.S. central bank has also been gradually cutting its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities, which it bought in the wake of the 2007-2009 financial crisis and recession.

The Treasury announcement follows previous increases in auction sizes following the department’s quarterly meetings in February and May.

On Monday, the Treasury said in a statement it expects to issue $329 billion through credit markets during the July-September period, assuming an end-September balance of $350 billion.

The borrowing estimate for the third quarter is the highest since the same period in 2010 and fourth largest on record for the July-September quarter.

In its quarterly refunding announcement, Treasury said it would auction $78 billion in coupon debt next week and was still studying the possibility of an additional sale of 5-year TIPS securities in the second half of the year.

It said auction sizes of TIPS would remain unchanged over the next quarter.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Source: Investing.com

Related Articles

Stay Connected

- Advertisement -

Latest Articles

Popular Articles