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US Treasury to Lift Auction Sizes

The US Treasury plans to raise the sizes of all its nominal securities auctions to meet the pressing fiscal need of the COVID-19 crisis, their quarterly refunding statement released today showed.

On Monday, Treasury announced that it expects to borrow $3 trillion in the current quarter, much larger than any single quarter in history, to offset reduced tax receipts and sharply higher outlays resulting from the fight against COVID-19.

Treasury had already boosted the sizes of its regular bill auctions and plans to continue regular issuances of cash management bills through at least July.

The efforts to this point have raised $1.464 trillion on net since the end of March, according to the Treasury, lifting cash balances to historical levels. The changes announced today are expected to raise an additional $154 billion in the current quarter compared with the previous quarter.

The Treasury said it will sell $42 billion of 3-year notes on May 11, $32 billion of 10-year notes on May 12 and $22 billion of 30-year bonds on May 13, amounting to $96 billion. This is up from the $82 billion auctioned in April for these securities.

Going forward, Treasury expects to increase the auction sizes of the 2-year, 3-year, and 5-year notes by $2 billion per month and the auction sizes of 7-year notes by $3 billion per month.

The new and reopened 10-year note auction sizes will be increased by $5 billion each and the 30-year bond auction sizes will be increased by $3 billion each. This includes the auctions announced this morning for next week.

The auction sizes of Floating Rate Notes (FRNs), will increase by $2 billion, including the May and June re-openings. Treasury said that it expects the new 2-year FRN auction will be $24 billion in July.

In addition, the Treasury is introducing a new 20-year bond, which will auction for the first time on May 20. Treasury expects the initial size will be $20 billion with re-openings in June and July in the amount of $17 billion each.

At the moment, Treasury does not expect to alter the size of its inflation-protected securities, or TIPS, auctions, but will continue to assess its borrowing needs of both TIPS and nominal securities going forward.

Kevin Kastner

Julie Ros

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