What’s new: The Treasury Department on Wednesday gave new details of the structure of the new 20-year bond, which market observers expect to be sold in May for the first time since 1986.
The department said it plans to hold regular quarterly auctions of the new 20-year bonds, in February, May, August and November. Each auction will be followed by two reopenings in subsequent months. Market experts suggested to the department that the initial auction size be set at $10-$13 billion. Treasury said only that it will announce the timing and size of the first 20-year bond auction in May.
The department also took a step toward offering a floating-rate note indexed to the Secured Overnight Financing Rate or “SOFR. This is the government’s preferred alternative to the scandal-plagued Libor benchmark rate. Treasury said it would release a formal request for information from market participants to assess the potential demand for the SOFR-indexed note.
The numbers: As part of its regular quarterly refunding, Treasury announced it will sell $84 billion in notes and bonds next week. This is the same size as the package announced last quarter.
The department will auction $38 billion in 3-year notes TMUBMUSD03Y, +1.74% on Feb. 11 and $27 billion in 10-year notes TMUBMUSD10Y, +2.26% on Feb. 12. They government will also sell $19 billion in 30-year bonds TMUBMUSD30Y, +2.07% on Feb. 13.
Big picture: New estimates from the Congressional Budget Office forecast the government budget deficit will top $1 trillion over each of the next 10 years. The national debt is expected to top $31 trillion by 2030, the highest level since the end of World War II.
Market reaction: The yield on the 10-year Treasury is at 1.65%, down 27 basis points from its 2020 closing high hit in on Jan. 2.