The U.S. Treasury is likely to boost the size of auctions for bills, notes, and bonds in the fourth quarter when it announces its financing plans this week to fund a worsening budget deficit, analysts said.
Investors are playing close attention to this week's quarterly refunding announcement as a sharp jump in long-term Treasury yields has been partly attributed to concerns about the U.S. fiscal deficit. Since the end of July, the 10-year yield has climbed more than 100 basis points.
Analysts at TD Securities expect the deficit to expand to $1.85 trillion in 2024 from $1.69 trillion this year and projects another $677 billion of bills that mature in a year or less coming to market and about $1.7 trillion in notes and bonds. So far this year, the Treasury has issued about $1.6 trillion of additional bills and roughly $1.04 trillion in longer-term debt.
The Treasury is also likely to announce a buyback program for a possible launch in January, aimed at improving bond market liquidity, analysts said. The last time it conducted a regular buyback program was in the early 2000s, and it ended in April 2002.The latest refunding could see the Treasury skew issuance to the shorter-term bills, while the increase at the long end could shrink due to concerns about the impact of additional supply on long-term yields, analysts said.
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