The numbers: The U.S. Treasury announced it will sell $126 billion in notes and bonds next week at its quarterly refunding auction, a refunding size that is unchanged from the last quarter.
The department will auction $58 billion in 3-year notes
on May 11 and $41 billion in 10-year notes
on May 12. The government will also sell $27 billion in 30-year bonds
on May 13.
The offerings will refund $47.7 billion of Treasury notes and bonds maturing on May 15 and will raise $78.3 billion of new cash.
What happened: In a statement, Treasury said it anticipates no changes to the sizes of nominal coupon and floating-rate note auctions over the May to July quarter. This follows a substantial increase last year. The department will address any seasonal or unexpected variations in borrowing needs through changes in regular bill auction sizes and cash-management bills.
Big picture: Economists said it will be difficult for Treasury to lay out a policy path until Congress has completed work on President Biden’s two infrastructure proposals that are estimated to cost over $4 trillion. Some of the spending is expected to be paid for by higher taxes on the wealthy and businesses.
Adding to the uncertainty, the suspension of the federal debt limit passed by Congress expires on July 31.
In the past, Treasury has been able to use extraordinary measures to stay under the debt ceiling until Congress acts on the limit.
Senior Treasury officials called on Congress to raise the debt limit in a timely manner. They said there was no specific timeline for how long extraordinary measures might last this year because COVID-related uncertainty makes that very difficult to predict.
Treasury expects a cash balance of about $450 billion on July 31 and doesn’t expect bill issuance to be as volatile as it has been in past debt-limit episodes, officials said. There will be a modest reduction in bill issuance of around $150 billion.
Nancy Vanden Houten, an analyst at Oxford Economics, said the “drop dead” date when Treasury would hit the debt limit has been pushed until sometime in the fourth quarter.
Market reaction: The yield on the 10-year Treasury note has fallen to 1.607% early Tuesday from 1.674% one month ago.