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  • Writer's pictureEdward Ballsdon

US Treasury Supply declines...

The UST announcement of $2,999bn supply (why not $3trn?!?) for the current quarter grabbed all the headlines, but that actually means a decline in the monthly supply ahead. This quarter started in April, which saw $1,373bn of net issuance (gross issuance - matured redemptions). This means that over the next two months the UST will "only" need to issue an average of $ 813bn per month.

The UST also announced net supply of $ 678bn for the following Jul-Sep quarter, which means an average $226bn per month, which although much lower than current monthly issuance, is still pretty large compared to pre-Covid monthly net supply.

To stop real yields rising, the FED would have to purchase ~$1.5-2.0 trillion of USTs in the next five months, taking its' balance sheet to ~ $ 8.5-9trn by the end of September.

Tomorrow (6 May) there should be a full breakdown of issuance by maturity. The huge debt expansion as a result of the GFC shows that the UST initially issues short term bills to accumulate funds, and then starts issuing longer dated securities to term out debt and keep a decent average life for the outstanding debt (discussed in more detail in this post :

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