WASHINGTON – The U.S. Department of the Treasury is offering $62 billion of Treasury securities to refund approximately $54.4 billion of privately-held Treasury notes maturing on February 15, 2016. This will raise new cash of approximately $7.6 billion. The securities are:
- A 3-year note in the amount of $24 billion, maturing February 15, 2019;
- A 10-year note in the amount of $23 billion, maturing February 15, 2026; and
- A 30-year bond in the amount of $15 billion, maturing February 15, 2046.
The 3-year note will be auctioned on a yield basis at 1:00 p.m. ET on Tuesday, February 9, 2016. The 10-year note will be auctioned on a yield basis at 1:00 p.m. ET on Wednesday, February 10, 2016. The 30-year bond will be auctioned on a yield basis at 1:00 p.m. ET on Thursday, February 11, 2016. All of these auctions will settle on Tuesday, February 16, 2016.
The balance of Treasury financing requirements will be met with the weekly bill auctions, cash management bills, the monthly note and bond auctions, the February 30-year Treasury Inflation Protected Security (TIPS) auction, the March 10-year TIPS reopening auction, the April 5-year TIPS auction, and the regular monthly 2-year Floating Rate Note (FRN) auctions.
Projected Financing Needs: Pathway to Increased Bill Issuance
In November 2015, Treasury reiterated intentions to increase Treasury bill issuance. The supply of bills outstanding as a percentage of the total Treasury portfolio is at a multi-decade low while demand for Treasury bills is high and is expected to grow. Given current projected financing needs over the next few years and the existing auction schedule, Treasury will modestly reduce the issuance of coupon securities in order to increase Treasury bill issuance.
Accordingly, Treasury is announcing reductions of $1 billion to each of the next 5-year, 7-year, 10-year, and 30-year nominal coupon offering sizes, for both new issues and reopenings. In aggregate, relative to what would have been issued under the previous schedule, nominal coupon issuance will be reduced by $12 billion over the upcoming quarter. These adjustments will begin with the 10- and 30-year nominal note and bond auctions being announced today. Auction sizes for Floating Rate Notes (FRNs) will remain unchanged.
Treasury is also announcing downward adjustments to the offering sizes for all TIPS tenors over the next quarter. Specifically, Treasury is announcing reductions of $2 billion to each of the next 5-year, 10-year, and 30-year TIPS offering sizes, for new issues and reopenings. In aggregate, relative to what would have been issued under the previous schedule, TIPS issuance will be reduced by $6 billion over the upcoming quarter. This downward adjustment will begin with the 30-year TIPS security auctioned on February 18, 2016. TIPS continue to be an important product in Treasury’s debt issuance portfolio, and Treasury is fully committed to the TIPS program. Indeed, Treasury remains the largest global issuer of inflation-linked debt, with nearly $1.2 trillion of TIPS outstanding.
Treasury will assess the need to make further downward adjustments to nominal coupon and TIPS issuances at the next Quarterly Refunding in May.
January Request for Information (RFI) on the Evolution of the Treasury Market Structure
On January 19, 2016, Treasury issued a “Notice Seeking Public Comment on the Evolution of the Treasury Market Structure.” The RFI is a continuation of the actions identified as next steps in the “Joint Staff Report: The U.S. Treasury Market on October 15, 2014” (“JSR”) published on July 13, 2015. Treasury staff developed this RFI in consultation with the staffs of the Board of Governors of the Federal Reserve System, the Federal Reserve Bank of New York, the U.S. Securities and Exchange Commission, and the U.S. Commodity Futures Trading Commission.
As noted in the RFI, there is broad consensus that the regulatory community should have access to more comprehensive data about Treasury market activity, particularly in the cash market. The RFI asks a series of detailed questions about the most effective and efficient way to achieve that objective, and we expect to have in place by the end of the year a comprehensive plan to begin collecting Treasury market data for use by the official sector.
The RFI also recognizes that the extent of publicly available data on transactions in U.S. cash Treasury markets is substantially less than what is available for other major asset classes and seeks comment on the appropriate level and form of data that should be made available to the public.
Treasury encourages market participants and other interested parties to submit comments on the January 19 RFI that will inform the ongoing work related to the next steps identified in the JSR. The comment period will close on March 22, 2016. Directions for submitting comments to Treasury can be found in the RFI at http://www.regulations.gov/#!documentDetail;D=TREAS-DO-2015-0013-0001.
Large Position Report (LPR) Test Call
On December 10, 2014, Treasury published a final rule amending its large position reporting rules to improve the information reported so that Treasury can better understand supply and demand dynamics in certain Treasury securities. The rule became effective on March 10, 2015. Treasury has not conducted an LPR call since the implementation of the new rule in order to permit market participants sufficient time become familiar with the rule and make necessary adjustments to reporting systems. Sometime over the next six months, Treasury intends to issue a LPR test call. Further information regarding Large Position Reports, including supplementary guidance, can be found at https://www.treasurydirect.gov/instit/statreg/gsareg/gsareg.htm.
Test Buyback Operation
Treasury believes that it is prudent to periodically test the existing IT infrastructure to ensure that the buyback functionality remains operational. Within the next three months, Treasury will conduct another small-value buyback operation to continue testing the buyback infrastructure. Details of such an operation will be announced at a later date.
These small-scale buyback operations should not be viewed by market participants as a precursor or signal of any pending policy changes regarding Treasury’s use of buybacks.
Please send comments and suggestions on these subjects or others related to debt management to email@example.com. The next quarterly refunding announcement will take place on Wednesday, May 4, 2016.
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