Are you ready for a record debt auction at the Treasury Department this week?
In order to fund the federal government’s multi-trillion-dollar spending schemes, Treasury Secretary Steven Mnuchin is set to issue an enormous level of bonds to cover the bill.
Will there be enough of a demand?
From Bloomberg:
Treasury’s announcement Wednesday on its issuance plans for the coming months will signal how Mnuchin plans to manage a debt burden that’s poised to eclipse the record seen in the wake of World War II as a share of the economy. Analysts see the department needing to raise massive amounts of cash every quarter possibly into 2021.
Mnuchin has already lifted auctions of most bill maturities and some coupon-bearing debt to records as he finances the government’s efforts to cushion the economy against the pandemic. On Wednesday, the department will likely hoist its quarterly refunding auctions — encompassing 3-, 10- and 30-year securities — to a historic amount. It is also set to expand that round to include 20-year bonds, which it’s reintroducing for the first time since 1986.
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Wells Fargo is among bond dealers that expect the soaring debt load to eventually push up long-term borrowing costs. But so far that’s not happening. With the Federal Reserve vowing to hold rates near zero for the foreseeable future and buying hundreds of billions of dollars of Treasuries to keep markets calm, yields are still close to record lows.
Of course, this will coincide with the trillions in public and private bonds being issued in the coming weeks and months.
At the time of this writing, the benchmark 10-year Treasury note is up to 0.643 percent.
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