U.S. Treasury to continue shift to longer-dated debt

The U.S. Treasury Department said on Wednesday it plans to continue a shift to longer-term notes and bonds as it issues debt in coming quarters to fund measures to offset the impact of the COVID-19 epidemic.

The Treasury expects its borrowing needs to moderate but remain elevated according to a statement by Brian Smith, its deputy assistant secretary for federal finance, depending partly on what additional legislation is put in place.

The federal agency will use “long-term issuance as a prudent means of managing its maturity profile and limiting potential future issuance volatility,” Smith said.

As Treasury increases auction sizes, it will have larger increases in 7-year, 10-year, 20-year and 30-year notes and bonds, he said.

Treasury has been raising extra money to fund trillions of dollars in coronavirus-related economic aid allocated by Washington. As of Tuesday, White House negotiators were trying to reach a deal with congressional Democrats to extend relief measures including unemployment benefits, liability protections for businesses and a moratorium on evictions.

The Treasury on Monday had already said it plans to borrow $947 billion in the third quarter, about $270 billion more than it previously estimated for the July-September period, and Smith reiterated the $947 billion figure on Wednesday.[nW1N1RW032] Borrowing has spiked far above the quarterly record set during the 2008 financial crisis.

A declining economic outlook has driven down U.S Treasury yields across the curve to record or near-record lows, helping raise equity prices and lower borrowing costs.

Was it worth reading? Let us know.