Original title: will the US Treasury unveil an important plan on Wednesday or begin to deal with the fiscal deficit crisis?

In the coming months, the US Treasury will scale back its huge quarterly paper and bond sales for the first time in more than five years, foreign media reported. The change is so big that it is likely to be more than just a response to the Fed's impending reduction in the size of its purchases.

The U.S. Treasury Department will announce a so-called quarterly refinancing plan for long-term securities on Wednesday.At that time, it will announce what will happen to the US Treasury's bond issuance strategy.. While most dealers do not expect the size of the recent $126 billion debt refinancing to change, many believe the Treasury will prepare for debt cuts in November.

A few years ago, the federal deficit soared as Mr Trump announced tax cuts, and last year's outbreak triggered a surge in emergency spending and rising bond issuance. Although Congress is negotiating new spending on infrastructure and social programs, borrowing needs will fall as lawmakers work out new budgets for these multi-year plans.

Bank of AmericaMegan Meghan Swiber, an interest rate strategist, said:

"Federal financing needs will fall sharply from 2021 to 2022, and we believe that the Treasury needs to reduce bond issuance as soon as possible, otherwise there is a risk of excess funds."

If economists' forecasts are correct, the debt reduction plan could coincide with the Fed's reduced purchases of Treasuries. Federal Reserve Chairman Colin Powell said last week that policy makers have begun to discuss the timing and speed of future bond purchases. Analysts expect the projects to be launched in early 2022.

JPMorgan ChaseNet debt issuance, including bills, is expected to total $1.46 trillion in 2022, about $860 billion less than this year. In terms of bills and bonds alone, net issuance next year will be about $1tn lower than in 2021, the bank said. At the same time, JPMorgan forecasts that the Fed will buy only $316 billion of such securities from the secondary market by 2022, down from $960 billion this year, given the Fed's tapering of bond purchases.

The decline in Treasury issuance is likely to further allay fears of another "tapering panic" in 2013, when markets panicked about the prospect of the Fed withdrawing its stimulus programme. The decline in Treasury yields in recent months has also helped the market quell such concerns.

However, John Briggs, global head of desktop strategy at National Westminster Banking Group, believes the Treasury will not cut back on bond issuance:

"this is because we are still a long way from achieving a balanced budget. For example, after August 2022, even if we reach the final equilibrium, the debt will still be higher than before the epidemic, and we have to recognize that the deficit will last for a long time. "

In addition to refinancing, the Treasury is now trying to avoid hitting the federal debt ceiling, which ended on Sunday after a two-year moratorium. Economists and strategists expect Congress to act again to raise or suspend the repayment ceiling before the Treasury does not have enough room to avoid a default in the autumn.

At present, primary dealers who trade directly with the Fed disagree on when to scale back paper and bond issuance.

Goldman SachsGroup and Morgan StanleyIt is believed that the refinancing in February is more likely to be a starting point for debt reduction. But Barclays and Royal Bank of CanadaCapital markets say the reduction is likely to start with an auction next week.

If most traders are correct, the Treasury will keep the refinancing at $126 billion, including:

A $58 billion three-year bond

A $41 billion 10-year bond

A $27 billion 30-year bond

This is a far cry from the debt pattern before the outbreak. The total amount of outstanding treasury bonds has soared by about 50 per cent since the end of 2017 to $21.7 trillion.

Because the Treasury is eager to accumulate cash for emergency relief spending, most of the revenue growth in 2020 will be in the form of bills. One-year Treasurys accounted for about 25 per cent of the total outstanding balance of US Treasuries last year. After reducing the size of paper issuance to reduce record cash reserves, the ratio is now about 20 per cent. The Treasury loan Advisory Committee (Treasury Borrowing Advisory Committee), made up of leading underwriters and investors, recommends a range of 15 per cent and 20 per cent.

The U.S. Treasury Department will release quarterly financing estimates on Monday.At the same time, it will alsoRelease cash for the next few quartersBalanceHypothetical latest data.Details of the bill issuance plan will be announced on Wednesday. According to the latest forecast from the Congressional Budget Office, as the epidemic improves, the fiscal deficit will fall from $3 trillion this year to $1.2 trillion next year.