The US Treasury will announce the May-July bond issuance scale this week. The only question is probably the amount of US inflation-protected treasury bonds (TIPS) issued.
According to a recent quarterly statement from the US Treasury Department on January 31, TIPS is still affected by “incremental growth,” while conventional bond issuance is expected to remain stable after starting to grow in August 2023. The US Treasury Department will announce the distribution plan for the current quarter at 8:30 Washington time on Wednesday.
Bond traders expect the total issuance volume of 3-, 10-, and 30-year bonds next week to be $125 billion, unchanged from the recent comparable issuance scale. Although the size of these releases will only be officially determined on Wednesday, guidelines for the entire quarter will usually also be published.
Traders without exception expect that the US Treasury will keep the size of the seven conventional fixed income bonds unchanged for the next three months. The upward revision of the second-quarter loan valuation announced by the Ministry of Finance on Monday reflects a reduction in the scale of cash income, suggesting that the supply of treasury notes with a term of one year or less will shrink less than expected during the period.
For TIPS, the distribution schedule includes a 10-year renewal in May, a 5-year renewal in June, and a 10-year new release in July. Renewals are expected to follow previous rules; the only uncertain forecast is the July new release.
Of the 23 US Treasury bond Tier 1 traders that made predictions, more than half expect the issuance of TIPS to increase to 19 billion US dollars in July, while the rest believe it will remain at 18 billion US dollars. ASL Capital Markets did not provide forecasts.
Citigroup strategists are more likely to anticipate that issuance volume will increase to $19 billion to maintain TIPS's share of total issuance, “especially after a sharp increase in nominal bonds over the past year.” Barclays strategists expect to issue a new $18 billion 10-year TIPS, and the 5-year TIPS are “best suited to absorb additional supply.”