Refunding Preview

January 31st, 2017 12:04 pm | by John Jansen |

Via Bloomberg:

UST REFUNDING PREVIEW: $62b Expected; Bill Supply in Focus
2017-01-31 15:57:55.937 GMT

By Alexandra Harris
(Bloomberg) — February refunding announcement at 8:30am ET
Wednesday may feature outlook for bill issuance, especially in
light of debt-ceiling reinstatement March 16; next week’s
auction sizes are expected to be unchanged from November
refunding ($24b 3Y, $23b 10Y, $15b 30Y).

* Expected Treasury will discuss issuance of cash-management
bills (CMBs) to account for distortions in seasonal
borrowing created by the debt ceiling
* Quarterly survey of primary dealers conducted in preparation
for refunding announcement asked about current supply/demand
dynamics in the TIPS market, as well as near-term outlook
for MBS market and impact of flows from convexity hedging
* In Nov. 1 minutes, TBAC said increase in bill supply should
be possible in the short-term without adjustments to coupon
sizes; noted potential for significant distortions to bill
supply without a timely resolution to the debt limit
* Treasury on Jan. 30 projected net issuance of $57b for 1Q,
up $1b from $56b estimate in October

* Credit Suisse (Praveen Korpaty and others)
* Refunding announcement should be “uneventful”; likely
T-bills will address any additional financing needs this
year and increased coupon supply will come in 2018

* Jefferies (Ward McCarthy and Thomas Simons)
* Treasury may issue cash management bills (CMBs) in
February and March because the debt ceiling is expected
to create “significant distortions” in 1Q’s usual
seasonal pattern of borrowing; MORE

* JPMorgan (Jay Barry and others)
* “We expect that Treasury will likely increase coupon
auction sizes later this year,” beginning by reversing
last year’s cuts at the November refunding; 5Y-30Y sizes
would increase by $1b, TIPS by $2b; MORE

* Nomura (George Goncalves and others)
* Treasury bill program should be able to absorb any
unexpected financing needs in near future; risks of
tweaks to coupon sizes may stem from push for duration

* SocGen (Subadra Rajappa and others)
* Treasury likely to focus on Treasury bill supply as it
makes little sense to adjust coupon issuance without
getting an “accurate read on potential spending needs”

* TD (Gennadiy Goldberg and others)
* Tweaking policy doesn’t make sense until “some
clarity” is achieved on the fiscal front; looking for
further discussion of ultra-long debt issuance and 2-mo.
bill maturity

* Wrightson ICAP (Lou Crandall)
* Quarterly borrowing statement should confirm that it plans
to use CMBs later in February or early March to temporarily
offset some of the paydowns in regular bills;

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