$125B in Treasury Securities on Offer, No Change in Sizes — Evening Brief – 02.05.25
The Treasury is issuing $125 billion in 3-, 10-, and 30-year securities, consistent with prior quarters, to refinance roughly $106.2 billion of privately held Treasury notes and bonds maturing on February 15, 2025. The issuance is anticipated to generate around $18.8 billion in fresh capital from private investors.
The securities are a $58 billion 3-year note maturing February 15, 2028; a $42 billion 10-year note maturing February 15, 2035; and a $25 billion 30-year bond maturing February 15, 2055.
The Treasury stated that it believes its current auction sizes position it well to address potential changes in the fiscal outlook and the pace and duration of future SOMA redemptions. It also mentioned that, based on projected borrowing needs, it anticipates maintaining the current nominal coupon and floating rate note (FRN) auction sizes for “at least the next several quarters.”
Under the new leadership of Scott Bessent, the Treasury maintained the forward guidance statement from his predecessor, Janet Yellen. However, in a separate statement, the Treasury Borrowing Advisory Committee (TBAC), which includes Wall Street advisors such as dealers, fund managers, and other market participants, suggested that Treasury consider “removing or modifying the forward guidance on nominal coupon and FRN auction sizes” that has been included in the refunding statement for the past four quarters.
The committee decided not to make any changes yet because it believed that any shift in language could be interpreted as signaling an expected near-term increase in nominal coupon auction sizes. This approach aligns with the TBAC’s recommended financing tables and Treasury’s goal of maintaining a regular and predictable issuance strategy.
TBAC members also highlighted “elevated uncertainty regarding macroeconomic developments and the fiscal trajectory,” noting that current primary dealer assumptions and issuance levels suggest a $1.5 trillion cumulative funding shortfall over the next three years.
Meanwhile, the Treasury has been restricted by the federal debt ceiling, which was reimposed following its suspension in mid-2023. The department has implemented extraordinary measures to avert a debt-ceiling violation. Consequently, although the U.S. is accruing almost $1 trillion in additional debt roughly every three months, the public will not observe the actual sum until July, when the forthcoming debt ceiling agreement is enacted.
“Until the debt limit is suspended or increased, debt limit-related constraints will lead to greater-than-normal variability in benchmark bill issuance and significant usage” of cash management bills, the department said.
An additional challenge facing the Treasury’s debt issuances in the coming months is the uncertainty regarding when the Federal Reserve will halt or slow its current strategy of reducing Treasury holdings, which is currently being carried out at a pace of up to $25 billion per month.
According to Bloomberg, dealers now expect quantitative easing to conclude in the summer rather than the spring, which “slightly increases the expected need for borrowing from the private sector in 2025,” according to the TBAC report to the Treasury.