Treasury to cut auction sizes for coming quarter

© Reuters. The Treasury Department is pictured in Washington, U.S., April 25, 2021. REUTERS/Al Drago

(Reuters) - The U.S. Treasury Department said on Wednesday it would continue reducing its coupon issuance across all maturities in the coming quarter, with the largest cuts coming in the seven-year and 20-year maturities.

The Treasury said it was trimming issuance, but by smaller increments than in previous quarters, based on projected borrowing needs that include recent strong tax receipts and potential redemptions of Treasury securities by the Federal Reserve.

The Treasury said additional reductions may also be necessary, depending on developments in its projected borrowing needs.

The U.S. government had increased auction sizes in 2020 to pay for coronavirus-related spending.

The Treasury said it expects to cut the size of 2-, 3- and 5-year note auctions by $1 billion each per month over the coming quarter, while 7-year auctions will be cut by $2 billion per month in the same period.

New and reopened 10-year note and 30-year bond auctions will also be reduced by $1 billion, while the 20-year bond auctions will be cut by $2 billion.

The Treasury also said it expects to maintain the size of its May reopening auction of 10-year Treasury Inflation-Protected Securities (TIPS) at $14 billion. It will increase the size of the June five-year TIPS reopening auction by $1 billion to $18 billion and increase the July 10-year TIPS new issue auction by $1 billion to $17 billion.

The Treasury said it will sell $45 billion in three-year notes, $36 billion in 10-year notes and $22 billion in 30-year bonds next week.

The U.S. Treasury said on Monday it expects to pay down $26 billion in debt the second quarter, down from a January borrowing estimate of $66 billion, primarily because of an increase in receipts. The second-quarter estimate assumes an end-of-June cash balance of $800 billion.