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November Refunding Preview: Where There's Smoke, There's Fire * Treasury's
November Refunding round begins Monday Nov 2 (3pm ET) with the Treasury's update
on financing requirements for the current (Oct-Dec) and next (Jan-Mar) quarters.
* As usual, more attention will be on the full Refunding announcement on
Wednesday (8:30am ET), in which any adjustments to the policy statement's
guidance on future auction size increases will be the most closely-watched
aspect but there is some speculation that Treasury could surprise with an
adjustment in coupon sizes. * More specifically, there is some anticipation that
Treasury could announce a reduction in long-end (20Y, 30Y) coupon auction sizes.
We don't expect any change in coupon sizes at this refunding though some
analysts have it as a base case (Citi: $3B reduction in 20Y and 30Y sizes per
auction) and most warn that there is a distinct possibility. * The guidance
paragraph of the Refunding policy statement is almost unanimously expected to be
changed in some way. It could be a subtle change (removing "at least"), though
we suspect they will go a little further than this, by more clearly keeping the
door open to changes in future Refundings. This could for instance include
guidance that Treasury is considering making changes to sizes over the coming
quarters. * Upcoming Supply: November's auctions are set to begin Nov 9 with
$58B in 3Y Note, Nov 10 with $42B in 10Y Note, and Nov 12 with $25B in 30Y Bond.
* Monthly Auction Review: October's coupon auctions were generally well
digested, with five of the seven sales seeing small trade through/tails. A
souring of risk sentiment in tech/AI-related equity names helped global yields
away from multi-year highs, likely facilitating demand at primary auctions.
Oct-30 20:10
