(Bloomberg)-The American treasury held his guidance on Wednesday in maintaining the sale of long-term debt until well in 2025, despite the fact that the newly installed secretary Scott Bessent had criticized the issue strategy of his predecessor before he was chosen for the job.
Most of them read from Bloomberg
At the helm of the American debt management policy for the first time, Bessent left broadly intact former secretary Janet Yellen’s Agenda. The treasury will sell $ 125 billion in debts next week in its so-called quarterly repayment auctions, which include 3, 10 and 30-year-old running times, the same amount as in the past quarters.
“Based on the current expected loan needs, Treasury expects to maintain the nominal coupon and frn auction sizes for at least the following quarters,” the Department said in its statement on issue plans. Coupons refer to interest -bearing effects and FRN stands for notes of floating speeds.
Similar language has been present since the last bump in auction sizes at the beginning of last year. Bessent, a former hedge fund manager, together with a number of Republicans, had accused Yellen of a longer dated debt sale to suppress long -term loan costs and to help the economy before the elections.
The forward guidelines was maintained, even when the Treasury Leense Advies Committee – a panel of external advisers consisted of dealers, fund managers and other market participants – “treasury uniform encouraged to consider deleting or changing”, a separate explanation turned out on Wednesday. “Some members preferred to drop the language to display the uncertain prospects, although the majority preferred the language during this meeting.”
Treasury decided
The gap of prolonged lives above the rates at treasuries with shorter running times reduced after the announcement of the repayment. The proceeds of ten years fell about nine basic points to 4.42%, while the rates on two -year nuts with almost five basic points were lower.
A senior treasury officer told reporters, when asked about that guidance, that TBAC offers recommendations, but they are exactly that, and it is the department that decides.
Dealers had on a large scale predicted auction sizes that would remain stable next week, but given the projections for continuous American tax deficits, they have seen an increased sale of longer durable times at a certain moment. Before the announcement on Wednesday, many said the bump would come in November, while some saw it happening in August. Strategists at Morgan Stanley, on the other hand, had not expected any change until next year.
And although a number of dealers expected unchanged language, it was seen as a close call. Jefferies said after the release that it came as a surprise.
“We expected that Treasury would edit these guidelines on the issue of Coupon in the short term to reflect the passage of time, as nothing else,” wrote Thomas Simons, a senior economist at Jefferies in a memorandum. “Bessent has been critical of the dependence on its predecessor in the field of short -term issue in the short term, which implies an intention to increase the issue in longer durations. Today’s announcement suggests that this assignment will take a long time to implement. “
Regarding next week’s auctions, the $ 125 billion will consist of the following:
$ 58 billion in 3-year banknotes on 11 February
$ 42 billion in 10-year banknotes on 12 February
$ 25 billion in 30-year bonds on 13 February
The reimbursement will generate new money of around $ 18.8 billion.
The treasury on Wednesday also said that the issue of debts of the floating speed kept unchanged, while the sale of some protected effects or tips from the treasury inflation continued to drift.
In the next three months, the treasury said that it is planning to use bills – which mature in a maximum of one year – to meet any seasonal or unexpected variations in loan needs.
Since the beginning of this year, the treasury has been limited by the federal debt limit, which returned after he was suspended in mid -2023. The Department has begun to use extraordinary measures to hold a debt break.
Boundary
“Until the debt limit has been suspended or increased, the debt-limit-related restrictions will lead to more than normal variability in benchmarking issue and considerable use” of accounts for cash management, the department said.
With regard to tips, the treasury described the following adjustments for the period from February to April:
To increase the new number of 5 April to $ 25 billion
Increase the tips of 10 March to reopen by $ 1 billion to $ 18 billion
To maintain the size of the 30-year tips of 30 February, a new issue of a new issue is $ 9 billion
Another complication for the debt sale of the Treasury in the coming months and quarters is uncertainty when the Federal Reserve will stop or will stop, his steady reduction of treasuries – which currently runs to $ 25 billion a month. When the FED completely breaks down its so -called quantitative tightening, this reduces the amounts that the treasury must borrow from the public.
Dealers now see QT as ending in the summer, instead of spring, “and the expected need for borrowing the private sector in 2025 somewhat increasing,” TBAC reported to the treasury. “Market participants considered risks such as crooked to a later finish,” although factors such as the dynamics of debt limit can make the assessment of the FED more difficult whether there is a “sufficient” size of reserves in the system, TBAC said.
Wednesday’s statement also described a new schedule with a return for the beginning of February to May.
(Adds reactions from strategists and details about changes to the yield curve.)
