–$84 Bln in Borrowing, with $38 bln/3-yrs; $27 bln 10-yrs; $19 bln 30-yrs
By Denny Gulino
WASHINGTON (MaceNews) – The U.S Treasury quarterly refinancing update Wednesday did not surprise, with the refunding announcement of $84 billion divided as expected with $38 billion in 3-year notes, $27 billion in 10-year notes and $19 billion in 30-year bonds.
There was no finer resolution in the department’s guidance as to when its current “extraordinary measures” will be exhausted only to say it will happen “sometime on the second half.” The private-sector Treasury Borrowing Advisory Committee, in its report to Treasury, wasn’t much more definitive, saying the so-called X-Date would be “in the third or fourth quarter of 2019.”
On Monday, Treasury had said it expects to borrow $30 billion in the new quarter, $53 billion less than announced for the first calendar quarter of this year. The Wednesday announcement said the cash balance can drop below what is now considered the “prudent” level of $150 billion, again, because of debt limit constraints.
After peaking in late March, bill issuance “is now expected to gradually decline over the remainder of the second calendar quarter,” the latest announcement said, as Treasury continues to stay under the debt limit, the suspension of which was lifted March 1..
Treasury expects the June TIPS 5-year reopening to go to $15 billion, and the July 10-year TIPS to increase to $14 billion while the May TIPS 10-year reopening will not change.
The TBAC memo to Treasury agreed that Treasury enjoys “significant flexibility to respond to potential changes in Fed policy including potential long run maturity composition changes in the SOMA Treasury portfolio.”
In the minutes released Wednesday of the TBAC meeting with Treasury officials Tuesday, Director of the Office of Debt Management Fred Pietrangeli told the group that “a meaningful financing gap is still expected by FY 2021,” which begins Oct. 1. That “despite potential reductions in projected privately held net marketable borrowing needs resulting from the Fed’s end of capped redemptions in the System Open Market Account portfolio at the end of September.
The borrowing estimate of $30 billion with a cash balance of $270 billion at the end of June imply a nearly $240 billion total pay-down.
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Update: In their 10 a.m. ET refunding news conference, Treasury officials continued their reluctance to say anything more about the time remaining before new borrowing could stop – leading to a subsequent default if Congress did not act. One reporter asked, since the refunding announcement said the so-called X Date would fall “sometime” in the second half, could that be as soon as July. Again, officials said there are too many uncertainties to say. Otherwise, officials’ answers broke no new ground.