US Treasury keeps auction sizes in coming quarter as debt ceiling weighs

US Treasury keeps auction sizes in coming quarter as debt ceiling weighs

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NEW YORK/WASHINGTON — The U.S. Treasury Department said on Wednesday it plans to keep coupon issuance across all maturities through July amid uncertainty surrounding the debt limit, announcing total quarterly refunding of $96 billion.

The refunding would raise new cash of $20.8 billion and refund approximately $75.2 billion in privately held Treasury notes maturing on May 15, 2023.

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In a statement, Treasury said it would sell $40 billion in U.S. three-year notes, $35 billion in 10-year notes, and $21 billion in 30-year bonds next week, unchanged from the last refunding announcement.

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The department said it “believes current issuance sizes leave it well-positioned for its near-term borrowing needs.”

The Treasury did not alter its outlook issued on Monday for a possible default on U.S. payment obligations as early as June 1 without an increase or suspension of the federal debt ceiling.

In a statement to Treasury Secretary Janet Yellen, the Treasury Borrowing advisory Committee said that, due to concerns over the debt ceiling, investors are already demanding a yield premium for Treasury bills maturing in June, causing them to trade cheaply compared with surrounding securities.

“The Committee strongly believes that Congress needs to raise or suspend the debt limit with all due haste. Failing to do so is reckless and is already disrupting Treasury market functioning, increasing costs to the taxpayer, and constraining economic growth,” the panel said.

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The June 1 estimate raised the risk the United States is headed for an unprecedented default that would rattle the global economy, adding more urgency to political action in Washington, where Democrats and Republicans braced for a months-long standoff.

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The U.S. Treasury said it expects to borrow $726 billion in the second quarter, higher than the January estimate by $449 billion due to a lower cash balance at the beginning of April and forecasts of lower receipts and outlay for the period.

(Reporting By Gertrude Chavez-Dreyfuss in New York and David Lawder in Washington; Editing by Chizu Nomiyama and Jonathan Oatis)

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