Wednesday's refunding announcement is in focus as traders look for any shift toward longer-dated debt while oil-price gains and inflation concerns lift longer-dated Treasury yields to multi-year highs.
U.S. Treasury said on Monday it expects to borrow $739 billion in the third quarter, $68 billion more than it projected in May, as lower projected cash flows were only partly offset by a higher-than-assumed starting cash balance. Excluding that larger starting cushion, borrowing needs are $87 billion above the May estimate. The quarterly refunding statement assumes a cash balance of $950 billion at the end of September and projects $628 billion of borrowing in the fourth quarter based on a year-end cash balance of $850 billion. Treasury also said it borrowed $190 billion in the second quarter and ended June with a cash balance of $919 billion, which was $1 billion above its May projection and $18 billion less than expected when excluding the higher-than-assumed end-of-quarter cash balance. Traders are focused on Wednesday's refunding plans (debt issuance schedule), including auction sizes, for signs the department may lean more heavily on longer-dated debt (bonds maturing further in the future) in coming quarters. Analysts said surging oil prices as the war between Israel and Iran re-intensifies, combined with already-elevated inflation concerns and multi-year highs in longer-dated Treasury yields (government borrowing costs), give Treasury added incentive to keep issuance predictable and avoid further rattling a jittery bond market.