How Treasury Averted A Bond Market "Earthquake" In The Last Second: What Everyone Missed In The TBAC's Remarkable Refunding Presentation

Ahead of last week's Treasury Refunding Announcement (and the FOMC) we correctly said that the Treasury was now doing the Fed's job for it (something Powell himself admitted by unexpectedly sneaking a warning about "financial" not just "credit conditions" in the latest statement) by issuing so much debt the recent surge in the term-premium had led to a sharp tightening in financial conditions which was the equivalent of as many as 4 rate hikes. But there is another way that the Treasury, and specifically its quarterly refunding statement, has become very much like the Fed.

First, a little background.

Recall that last week's refunding announcement sparked a powerful rally under Treasuries (which sent yields tumbling at a time when everyone was terrified of a spike above 5%) because contrary to Wall Street expectations of a $114 billion in coupon offerings during this refunding week, the Treasury projected "only" $112 billion.