Quarterly Reimbursement Statement by Assistant Financial Markets Secretary Josh Frost – Treasury | Vette Leader

WASHINGTON — The US Treasury is offering $98 billion worth of Treasury bills to repay approximately $54.1 billion of privately held Treasury bills and bonds maturing on August 15, 2022. This offering will raise approximately $43.9 billion in new cash from retail investors. The securities are:

  • A 3-year, $42 billion bond due August 15, 2025;
  • A 10-year, $35 billion bond due August 15, 2032; and
  • A $21 billion 30-year bond issue due August 15, 2052.

The 3-year bond will auction on Tuesday, August 9, 2022 at 1:00 p.m. ET on a yield basis. The 10-year bond will be auctioned on a yield basis on Wednesday, August 10, 2022 at 1:00 p.m. ET. 2022. The 30-year bond will be auctioned on a yield basis on Thursday, August 11, 2022 at 1:00 p.m. ET. All of these auctions will be settled on Monday 15th August 2022.

The Treasury’s remaining funding needs during the quarter are met through weekly bill auctions, cash management bills (CMBs) and monthly auctions of notes, bonds, Treasury inflation-linked notes (TIPS) and 2-year floating rate notes (FRNs).

ANTICIPATED FUNDING REQUIREMENTS AND EXPENDITURE PLANS

Since the May refund, the Treasury Department has continued to receive information on projected borrowing needs, including an additional quarter of tax revenue and clarity on the timing and pace of the redemption of government bonds from the Federal Reserve System’s open market account. Based on this updated information, the Treasury intends to further reduce the auction sizes of securities with nominal coupons in the upcoming August-October 2022 quarter. The Treasury believes that these cuts announced today leave the Treasury well positioned to address potential changes in the fiscal outlook. Depending on the future development of projected borrowing needs, the Treasury will consider whether adjustments in future quarters may be appropriate.

The Treasury Department plans to address seasonal or unanticipated fluctuations in credit needs in the next quarter by changing regular invoice auction sizes and/or CMBs.

NOMINAL VOUCHER AND FRN FINANCING

Over the next three months, the Treasury Department expects to gradually reduce the size of each of the 2-, 3-, 5- and 7-year note auctions by $1 billion per month. As a result, the size of the 2-, 3-, 5- and 7-year bond auctions will each decrease by $3 billion by the end of October.

The Treasury Department expects a $1 billion decline in both new and reopened 10-year bond auction sizes and new and reopened 30-year bond auction sizes beginning in August.

The Treasury Department also expects declines of $2 billion in both new and reopened auction sizes for 20-year bonds beginning in August. Feedback from market participants over the past quarter suggested that a slightly larger reduction in auction sizes for 20-year bonds relative to surrounding maturities would improve the structural supply-demand balance at maturity, but also noted that it was important , ensuring benchmark liquidity size, etc. All adjustments are made in the context of Treasury’s regular and predictable issuance framework.

In addition, the Treasury expects to maintain the auction sizes for the reopening of 2-year FRN in August and September and to maintain the auction size for the re-issuance of 2-year FRN in October.

The table below shows the expected auction sizes in billions of dollars for the August – October 2022 quarter:

2 years

3 years

5 years

7 years

ten years

20 years

30 years

FRN

May-22

47

45

48

42

36

17

22

22

June 22

46

44

47

40

33

14

19

22

22nd of July

45

43

46

38

33

14

19

24

August 22nd

44

42

45

37

35

fifteen

21

22

September 22nd

43

41

44

36

32

12

18

22

Oct-22

42

40

43

35

32

12

18

24

The changes in notional coupon auction sizes announced today will result in a $51 billion reduction in issuance to retail investors in the August-October 2022 quarter compared to the May-July 2022 quarter.

TIPS FUNDING

During the next repayment quarter, the Treasury intends to increase the size of the 30-year TIPS reopening auction in August to $8 billion in August, increasing the 5-year TIPS auction size for new issues in October to $21 billion (an increase of $1 billion versus April new issue auction size). Given Treasury’s desire to stabilize the proportion of TIPS as a percentage of total outstanding marketable liabilities and continued robust demand, Treasury will continue to monitor TIPS market conditions and consider whether subsequent modest increases would be appropriate.

INVOICE ISSUANCE AND 4 MONTH INVOICE BENCHMARK

Based on current forecasts, Treasury expects the supply of outstanding bills of exchange to be the low point of the calendar year in mid-July. Since that bottom, the Treasury has increased outstanding bills by $77 billion and expects supply to increase by nearly $100 billion later in the current calendar quarter. As always, the Treasury will continue to assess the fiscal outlook and consider the need for adjustments to bill auction sizes as the outlook evolves.

As announced at the quarterly redemption in May, the Treasury plans to move the 4-month (ie 17-week) CMB to benchmark status. During this transition, Treasury will continue to issue the 4-month CMB on a regular weekly basis. Treasury expects the first benchmark 4-month invoice auction to be announced on October 18, 2022 and auctioned on October 19, 2022. As previously mentioned, Treasury intends to maintain the settlement and maturity cycle for Tuesday’s 4-month reference changes.

CHANGES TO THE TREASURY AUCTION RULES

On July 7, 2022, the Treasury Department issued a final rule that introduces several technical changes to modernize the auction regulations, improve their clarity, and improve consistency in the use of terminology. The changes will take effect on August 8, 2022. Accordingly, the non-competitive bid and award limits for all marketable government bond auctions will be increased from the current limit of $5 million to $10 million beginning with the close of auctions on Monday, August 8, 2022.

ADDITIONAL PUBLIC TRANSPARENCY

In June, the Treasury Department, in consultation with the Inter-Agency Working Group on Treasury Market Surveillance, took an important step in its work to strengthen Treasury market resilience by issuing a request for information to solicit public feedback on additional post-trade data transparency in secondary market transactions involving government bonds. Treasury encourages market participants to provide feedback during the 60-day public comment period, which remains open until August 26, 2022.

In addition, the Treasury Department supports the Financial Industry Regulatory Authority’s recently proposed rule change to publish aggregate US Treasury transaction information and statistics more frequently, such as B. Switching from a weekly to a daily publication.

Please send comments or suggestions on this or any other debt management-related topic to Debt.management@treasury.gov.

The next quarterly refund announcement will be on Wednesday 2nd November 2022.

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