Treasury Quarterly Refunding Preview

The Treasury's quarterly refunding announcement on May 3rd is expected to see all coupon sizes left unchanged, again according to Newsquawk. Specifically, it is expected to sell USD 40bln of 3yr notes. USD 35bln of 10yr notes, and USD 21bln of 30yr bonds.

Treasury looks to increase bills as a share of the marketable debt: the share is currently at the low end of the TBAC's recommended 15-20% range. However, the share will not meaningfully increase until a resolution on the debt limit is reached, which desks don't expect until later in the year, although we may get an updated view from the Treasury on when they expect the "X-date" to occur.

Treasury Secretary Yellen recently estimated it to be in early June, although depending on tax receipts, that could extend to later in the summer.

On coupon supply, some desks do expect the Treasury to increase auction sizes again from the end of this year once the debt limit is resolved and bill share has increased, so the TBAC minutes might give us some colour on that.

Finally, a Treasury buyback facility remains the wildcard, where nothing concrete is expected from this refunding, but a facility does appear closer following the recent questionnaire sent out to primary dealers on buybacks. BofA, to wit, "these questions combined with TBAC communication at the February refunding continues to suggest that the rollout of a buyback program at both the 0 - 1Y & 1Y+ tenors is more likely than not.''