US Quarterly Refunding: Treasury increases auction sizes slightly less than expected

The US Department of the Treasury announced its plans for debt auctions from November 2023 to January 2024. It revealed that it will gradually increase the size of most of its auctions and stated that it will require one more additional quarter of increases beyond the current announcement. The sales of 10-year notes were increased by $2 billion, below the market's expectations of $3 billion.

Key takeaways from the statement: 

The U.S. Department of the Treasury is offering $112 billion of Treasury securities to refund approximately $102.2 billion of privately-held Treasury notes maturing on November 15, 2023. This issuance will raise new cash from private investors of approximately $9.8 billion. 

Based on projected intermediate- to long-term borrowing needs, Treasury intends to continue gradually increasing coupon auction sizes in the upcoming November 2023 to January 2024 quarter.

Treasury anticipates that one additional quarter of increases to coupon auction sizes will likely be needed beyond the increases announced today.

Treasury plans to increase the auction sizes of the 2- and 5-year by $3 billion per month, the 3-year by $2 billion per month, and the 7-year by $1 billion per month. As a result, the auction sizes of the 2-, 3-, 5-, and 7-year will increase by $9 billion, $6 billion, $9 billion, and $3 billion, respectively, by the end of January 2024.

Treasury plans to increase both the new issue and the reopening auction size of the 10-year note by $2 billion and the 30-year bond by $1 billion. Treasury plans to maintain the 20-year bond new issue and reopening auction size. 

Market reaction

Wall Street futures moved to the upside and Treasury bonds rose. The 10-year yield dropped from 4.90% to 4.83%. Market participants are also digesting the ADP employment report while waiting for the Federal Reserve’s decision.