US Slows Pace of Increase in Quarterly Long-Term Debt Sales

The US Treasury increased its planned sales of longer-term securities by slightly less than most major dealers expected in its quarterly debt-issuance plan, in a move that signals officials may be concerned about the surge in yields over the past several months.

The Treasury said it will sell $112 billion of longer-term securities at its so-called quarterly refunding auctions next week, which span 3-, 10- and 30-year Treasuries. Many major dealers had predicted a $114 billion number, which would have represented the same pace of increase in longer-term debt sales as the department had unveiled at the last refunding, in August.

Compared with August, the key difference this time was a slower pace of increases in sales of 10-year and 30-year securities, with 20-year bonds kept unchanged. Treasury officials said the shift was small, and some dealers expected an even bigger slowdown in longer-dated issuance. Even so, those securities rallied on the news, with 30-year yields down about 10 basis points at 8:35 a.m.

Yields have surged since the August announcement, with 10-year rates up more than 75 basis points since then. While Treasury Secretary Janet Yellen has rejected the idea that increased government borrowing caused the move, market participants highlight increasing concern about the widening US fiscal deficit.

The Treasury in its Wednesday release also specified that it now expects a single additional step up in quarterly issuance of longer-term debt.

“As these changes will make substantial progress towards aligning auction sizes with projected borrowing needs, Treasury anticipates that one additional quarter of increases to coupon auction sizes will likely be needed beyond the increases announced today,” the Treasury said in its release Wednesday.