The US Treasury Department plans to sell $72 billion in its quarterly sales of long-term debt next week, and anticipates auction sizes will “remain steady” as Congress and the White House debate raising the debt limit.
The Treasury said it will auction $32 billion in three-year notes on May 10, $24 billion in 10-year notes May 11 and $16 billion in 30-year bonds May 12. The total amount was in line with expectations of bond market participants surveyed by Bloomberg.
Treasury Secretary Timothy F Geithner said May 2 the US will have three weeks more than previously seen before hitting its borrowing limit, giving the White House and Congress more time for a deal to raise the debt ceiling.
“There is so much uncertainty around the fiscal situation that Treasury debt managers want to simply sit tight and see how things play out,” Stephen Stanley, chief economist at Pierpont Securities in Stamford, Connecticut said in an e-mail in response to a question from Bloomberg News. “There is no compelling need to make major changes, so they plan to hold coupon auction sizes steady until there is enough clarity on the fiscal side to draw up a more definitive game plan.”
Treasury 10-year notes advanced after the Institute for Supply Management’s index of non-manufacturing companies slumped to the lowest since August. The yield, which moves inversely to price, fell to 3.22 per cent from 3.25 per cent late yesterday.
US borrowing
The US can borrow until August 2 after reaching the $14.29 trillion limit because of “stronger-than-expected tax receipts” and by taking “extraordinary measures” such as suspending the sale of bonds to finance state and local infrastructure projects, Geithner said in a letter to congressional leaders. He previously said the deadline would be July 8. Without such measures, the legal limit will be reached May 16, he said.
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Mary Miller, the Treasury’s assistant secretary for financial markets, said in a written statement that “Treasury expects nominal coupon auction sizes to remain steady in the upcoming quarter. The current suite of issuance provides Treasury a significant amount of flexibility.”
The Treasury decreased the size of its coupon auctions from May through November last year and has kept them steady since.
Debt limit
The Treasury has said it expects the US debt limit to be raised in a timely fashion.
“In the unlikely event that the debt limit is not increased by August 2, some alterations to the auction schedule should be expected,” Miller said in the statement. “In such a scenario, Treasury will provide as much notice as possible regarding any necessary changes to Treasury bill and coupon auction schedules.”
In her statement, Miller also said: “The balance of Treasury financing requirements will be met with the regular weekly bill auctions, the regular monthly nominal coupon security auctions, the May 10-year TIPS reopening, the June 30-year TIPS reopening auction and the July 10-year TIPS auction. Treasury may also issue cash-management bills during the quarter.”