July 30 (Reuters) - The U.S. Treasury is unlikely to make
any major changes when it announces its funding plans for the
coming quarter next week, though investors will be looking for
details on how it plans to navigate the reintroduction of the
U.S. debt ceiling and any hints of future cuts to issuance.
The governments two-year debt ceiling suspension will
expire on Saturday, though it is expected to be able to get by
until October or longer by using extraordinary measures. These
may include suspending some investments and security issuance.
U.S. Treasury Secretary Janet Yellen last Friday said that
Oct. 1, the first day of the next fiscal year, could be a
critical date due to large federal outlays scheduled for then.
The Treasury will be pretty preoccupied with their planning
for the debt ceiling and all the plans for how they will stave
off running out of cash under the debt ceiling in the next few
months, said Gennadiy Goldberg, an interest rate strategist at
TD Securities in New York.
A large focus for the market is when the government is
likely to reduce auction sizes, after ramping them up last year
in order to pay for COVID-19 related spending.
Many analysts expect that the Treasury may announce
reductions in its regular auctions of coupon-bearing supply
beginning in November.
I dont know if they will give an explicit announcement
that they will start cutting back in November, but once we get
into the fall they will have a better sense of their funding
needs and at the moment they are quite overfunded for next
year, said Goldberg.
Uncertainty when the debt ceiling may be lifted or
suspended, however, could keep the Treasury mum on any future
plans to cut issuance, at least for the time being.
I dont see any reason for them to pre-commit to that given
all the uncertainty associated with the debt ceiling, said Ian
Lyngen, head of U.S. rates strategy at BMO Capital Markets in
New York, adding that he doesnt expect anything market
moving, from the refunding news.
The Treasury will announce its overall refunding plans on
Monday and release details including the size of next months
auctions on Wednesday.
(Reporting By Karen Brettell; Editing by Alden Bentley and Nick