Quarterly Refunding Statement of Assistant Secretary for Financial Markets Josh Frost

What it says

This is the statement in which the Treasury announced that it would start lifting the size of its regular coupon auctions, beginning with the August to October 2023 quarter, to match projected intermediate- and long-term borrowing needs. It sets out monthly increases for each benchmark maturity from two to thirty years, with slightly larger steps in some tenors to keep supply and demand balanced along the curve, and signals that further gradual increases are likely. How far they go will depend on the fiscal outlook and on the pace and duration of SOMA redemptions, the run-off of the Fed portfolio. The statement also covers the quarterly refunding itself, modest increases to inflation-protected issuance, heavier bill issuance to rebuild the cash balance after the debt limit was suspended, and progress towards a regular buyback programme in 2024. Seasonal swings in need are absorbed by bills, not coupons.

What to take from it

1. 1

   The refunding offered $103 billion of securities against about $84 billion maturing, raising roughly $19 billion of new cash from private investors.

2. 2

   By the end of October 2023, the 2-, 3-, 5- and 7-year auctions were to be $9bn, $6bn, $9bn and $3bn larger respectively.

3. 3

   Both new issues and reopenings were lifted at the long end: 10-year by $3bn, 30-year by $2bn, 20-year by $1bn.

4. 4

   The pace of future increases was tied explicitly to the fiscal outlook and to future SOMA redemptions, the Fed's balance sheet run-off.

5. 5

   Unexpected or seasonal swings in borrowing are handled through bill auction sizes and cash management bills rather than through coupon sizes.

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