Quarterly Refunding Statement of Assistant Secretary for Financial Markets Josh Frost

WASHINGTON - The U.S. Department of the Treasury is offering $125 billion of Treasury securities to refund approximately $111 billion of privately-held Treasury notes maturing on August 15, 2024. This issuance will raise new cash from private investors of approximately $14 billion. The securities are:

• A 3-year note in the amount of $58 billion, maturing August 15, 2027;
• A 10-year note in the amount of $42 billion, maturing August 15, 2034; and
• A 30-year bond in the amount of $25 billion, maturing August 15, 2054.

The 3-year note will be auctioned at 1:00 p.m. ET on Tuesday, August 6, 2024. The 10-year note will be auctioned at 1:00 p.m. ET on Wednesday, August 7, 2024. The 30-year bond will be auctioned at 1:00 p.m. ET on Thursday, August 8, 2024. All of these auctions will take place on a yield basis and will settle on Thursday, August 15, 2024.

The balance of Treasury financing requirements over the quarter will be met with regular weekly bill auctions, cash management bills (CMBs), and monthly note, bond, Treasury Inflation-Protected Securities (TIPS), and 2-year Floating Rate Note (FRN) auctions.

NOMINAL COUPON AND FRN FINANCING

Treasury believes its current auction sizes leave it well positioned to address potential changes to the fiscal outlook and to the pace and duration of future SOMA redemptions. Based on current projected borrowing needs, Treasury does not anticipate needing to increase nominal coupon or FRN auction sizes for at least the next several quarters.

The table below presents, in billions of dollars, the actual auction sizes for the May to July 2024 quarter and the anticipated auction sizes for the August to October 2024 quarter:

Treasury plans to address any seasonal or unexpected variations in borrowing needs over the next quarter through changes in regular bill auction sizes and/or CMBs.

TIPS FINANCING

Given the intermediate- to long-term borrowing outlook and the structural balance of supply and demand for TIPS, Treasury believes it would be prudent to continue with incremental increases to TIPS auction sizes in order to maintain a stable share of TIPS as a percentage of total marketable debt outstanding. Over the August to October 2024 quarter, Treasury plans to maintain the August 30-year TIPS reopening auction size at $8 billion, increase the September 10-year TIPS reopening auction size by $1 billion to $17 billion, and increase the October 5-year TIPS new issue auction size by $1 billion to $24 billion.

BILL ISSUANCE

Given current fiscal forecasts, Treasury expects to modestly increase the offering size of short-dated bills being auctioned next week. Treasury expects to maintain those bill auction sizes through August and anticipates issuing a short-dated CMB to meet its cash management needs around the end of August. Then, in anticipation of the September 15th non-withheld and corporate tax date, Treasury expects to implement modest reductions to short-dated bill auction sizes during early to mid-September. Subsequently, over the course of October, Treasury anticipates increasing all bill auction sizes based on expected fiscal outflows.

As always, Treasury will continue to evaluate near-term borrowing needs and assess additional adjustments to bill auction sizes as appropriate.

6-WEEK BILL BENCHMARK

Treasury will continue with weekly issuance of the 6-week CMB while it makes necessary operational and systems changes in order to smoothly transition the 6-week CMB to benchmark status. Additional implementation details, including the likely timing of the first benchmark auction, will be provided at an upcoming refunding.

BUYBACKS

Today, Treasury is releasing a tentative buyback schedule for the upcoming refunding quarter and updating its buyback FAQs. As the schedule indicates, Treasury plans to conduct weekly liquidity support buybacks of up to $4 billion per operation in nominal coupon securities. In longer-maturity buckets, Treasury will conduct two operations, each up to $2 billion, over the refunding quarter. Treasury also plans to conduct two operations, each up to $500 million, in each of the TIPS buckets.

Starting in August 2024, Treasury is removing the 20 CUSIP cap on eligible securities for each operation and will move towards operation sizes consistent with its previous guidance (e.g., maximum of $30 billion per quarter across buckets for liquidity support).

Based on current projected fiscal flows around the September 15th tax date, Treasury plans to conduct cash management buybacks in September 2024. Amounts purchased in cash management buybacks would temper the reductions to bill auction sizes that would otherwise occur over the same timeframe.

Please send comments or suggestions on these subjects or other subjects related to debt management to [email protected].

The next quarterly refunding announcement will take place on Wednesday, October 30, 2024.

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