WASHINGTON: The US Treasury said on Wednesday it will reduce the offering size of coupon securities across the board during the first quarter in order to increase the level of Treasury bills it offers.
The department said there will be a reduction of $1 billion to each of the next five-year, seven-year, 10-year and 30-year nominal coupon offering sizes, for both new issues and reopenings.
The changes will take effect with the 10- and 30-year nominal note and bond auctions being announced on Wednesday.
In aggregate nominal coupon issuance will be reduced by $12 billion over the coming quarter.
In its quarterly refunding announcement on Wednesday, Treasury said it would auction $62 billion in coupon debt next week.
The move to increase bill supply comes at a time when the supply of bills outstanding as a percentage of the total Treasury portfolio is at the lowest in decades while demand for bills is high and expected to grow, the Treasury said.
"Given current projected financing needs over the next few years and the existing auction schedule, Treasury will modestly reduce the issuance of coupon securities in order to increase Treasury bill issuance," Acting Assistant Secretary for Financial Markets Seth Carpenter said in a statement.
Issuance of Treasury Inflation Protected Securities will also be reduced by $6 billion over the upcoming quarter, with reductions of $2 billion to each of the next five-year, 10-year and 30-year TIPS offering sizes.
This will begin with the 30-year TIPS security auctioned on February 18, the department said. Auction sizes for floating rate notes will remain unchanged.
Carpenter later said at a press conference with reporters that no decision has yet been made on whether to add a two-month bill maturity point to its securities offerings, which has been recommended by the Treasury's borrowing advisory committee as a way to satisfy investor demand for bills.
"We don't have a specific timeline.
We have to make lots of decisions; part of it will be informed by how financing needs evolve over time," he said, adding such a decision would be well telegraphed in advance.
On Monday, the department said it expects to issue $250 billion through credit markets during the January to March period, up from an initial estimate of $165 billion.
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