Key insights
- The Treasury's upcoming $125B auction to raise $41.7B new cash indicates continued government borrowing. Maintained coupon sizes and potential increases in short-dated bill offerings suggest a strategy to manage liquidity. The projected $900B cash balance at the end of June, potentially peaking at $1T in late July, reflects the scale of government financing needs. This could exert slight downward pressure on equities as it competes for investment capital.
Investing.com -- The U.S. Department of the Treasury announced Wednesday it will offer $125 billion of Treasury securities to refund approximately $83.3 billion of privately-held notes maturing on May 15, raising about $41.7 billion in new cash from private investors.
The offering includes a 3-year note totaling $58 billion maturing May 15, 2029, a 10-year note worth $42 billion maturing May 15, 2036, and a 30-year bond amounting to $25 billion maturing May 15, 2056, according to Deputy Assistant Secretary for Federal Finance Brian Smith.
The 3-year note will be auctioned at 1:00 p.m. EDT on Monday, May 11. The 10-year note auction follows at 1:00 p.m. EDT on Tuesday, May 12, with the 30-year bond auction scheduled for 1:00 p.m. EDT on Wednesday, May 13. All auctions will settle on Friday, May 15.
Treasury stated it plans to maintain nominal coupon and Floating Rate Note auction sizes for at least the next several quarters based on current projected borrowing needs. The department said it is monitoring System Open Market Account purchases of Treasury bills and growing private sector demand.
For the May to July quarter, Treasury will maintain Treasury Inflation-Protected Securities auction sizes at current levels, with the May 10-year TIPS reopening at $19 billion, the June 5-year TIPS reopening at $24 billion, and the July 10-year TIPS new issue at $21 billion.
Treasury expects to increase offering sizes of shorter-dated benchmark bills in coming weeks and plans to issue a short-dated cash management bill in late May to meet peak liquidity needs. The department anticipates modest reductions to short-dated bill auction sizes in June, followed by incremental increases across the curve in July.
The department is assuming a $900 billion cash balance at the end of June, with projections showing the Treasury General Account could peak at $1 trillion, plus or minus $50 billion, in late July.
Treasury plans to purchase up to $38 billion in off-the-run securities for liquidity support and up to $25 billion in the 1-month to 2-year maturity bucket for cash management purposes during the upcoming quarter.
Starting with the auction scheduled for June 16, 20-year bond reopening auctions will settle on the Friday of the auction week, while new issues will continue to settle at month end. The department said shortening the when-issued period should mitigate repo specialness that often occurs surrounding reopening auctions.
Treasury intends to issue a Large Position Report call sometime over the next three months, following its last call on September 9, 2025. The department will offer a free virtual workshop on June 26 regarding LPR rules.
The next quarterly refunding announcement is scheduled for Wednesday, August 5.
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