US TSYS/SUPPLY: Refunding Maintains Guidance, But TBAC Thought Differently (1/2)
Feb-05 13:43
There is no change to Treasury guidance on future issuance in the February Refunding policy statement, a modest dovish surprise vs many expectations that it would be watered down - "Based on current projected borrowing needs, Treasury anticipates maintaining nominal coupon and FRN auction sizes for at least the next several quarters."
- However, an interesting note to the Treasury from the Treasury Borrowing Advisory Committee (TBAC), which "uniformly" urged Treasury to modify this guidance - so we wonder how close a call it was for Treasury:
- "In discussing issuance recommendations, the Committee uniformly encouraged Treasury to consider removing or modifying the forward guidance on nominal coupon and FRN auction sizes that has been in the refunding statement for the past four quarters. Some members preferred dropping the language altogether to reflect the uncertain outlook, though the majority preferred moderating the language at this meeting. Universally, the Committee felt that any shift in language should not be read to indicate an expected near-term increase in nominal coupon auction sizes, consistent with the TBAC recommended financing tables and Treasury’s objective to be regular and predictable. Members noted elevated uncertainty regarding macroeconomic developments and the fiscal trajectory and observed that current primary dealer assumptions and issuance levels imply a $1.5T cumulative funding shortfall over the next three years. As always, Treasury should maintain flexibility in future issuance decisions. "
- Feb-Apr nominal coupon sizes were left unchanged, as expected.
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Full article: US Daily Brief
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