- Weekly issuance hit a record. The US government borrowed a record $839 billion this week through 11 auctions of bills, floating-rate notes and two-, five- and seven-year notes, eclipsing the previous record of $834 billion set in the same week a year ago, according to Bloomberg. That is about $5 billion, or roughly 0.6%, more than the prior high, by Lumida’s calculation.
- Most of it went to rolling over old debt. Only $106 billion represented new borrowing, with the majority used to repay holders of maturing bills. By Lumida’s calculation, new cash was about 13% of the total, leaving roughly $733 billion to refinance maturing debt.
- New borrowing is far from its peak. Net new cash peaked near $362 billion a week in March and April 2020, when auction sizes surged to finance pandemic measures. This week’s $106 billion is less than a third of that peak, by Lumida’s calculation.
- The mix of debt is the bigger worry. Over the past two years, the Treasury has met rising borrowing needs by increasing bill auction sizes while keeping note and bond sizes steady. Because bills mature more often, a growing bill share exposes taxpayers to rising interest rates.
What Happened?
The Treasury’s sales of bills and notes this week totaled a record $839 billion, both to repay holders of maturing debt and to raise new cash to finance the federal deficit, Bloomberg reported. The figure is the sum of 11 auction sizes. Gross weekly totals vary widely depending mainly on how much debt is maturing, but this week’s record underscores how the accumulated debt, and the rising cost of financing it, is pushing the government toward ever-larger auctions.
Why It Matters?
Record gross issuance means the market has to absorb ever more Treasury supply, which can pressure yields higher. “Nothing good is coming from Treasury gross weekly issuance at a record high,” said Tony Farren, managing director in rates sales and trading at Mischler Financial Group. “The No. 1 risk is that people are going to demand higher yields.” Relying on bills keeps longer-term supply stable for now, but it means more of the debt has to be refinanced frequently at prevailing short-term rates, raising the government’s sensitivity to Fed policy.
What’s Next?
The key date is Nov. 4, when the Treasury releases its next quarterly refunding statement. Since early 2024, the Treasury has said it expects to keep auction sizes steady “for at least the next several quarters,” and bond strategists expect that guidance to change. An announcement of larger note and bond auctions would add duration supply and could push longer-term yields higher.
Affected Tickers and Coins: TLT, IEF, SHY, BIL
Source: Bloomberg
