Treasury refunding total rises to $112 billion, with bigger 10-year auctions, amid record deficits

The U.S. Treasury will sell around $112 billion in coupon-bearing bonds in auctions this quarter, a modestly lower total than forecast, as it looks to fund record government deficits in a market replete with fixed income paper and elevated Treasury yields.

The overall total is around $9 billion higher than the Treasury's prior estimate, but around $2 billion lower than Street forecasts. The Treasury, which is tasked with providing regular and predictable funding at the least possible cost to taxpayers, said it will conduction auctions of $48 billion for 3-year notes $40 billion for 10-year notes, both $2 billion higher than prior levels, and $24 billion for 30-year bonds, a $1 billion increase.

The overall refunding auctions will raise around $9.8 billion, when netted out against retired debt. 

Earlier this week, the Treasury cut its current quarter borrowing forecast to by $76 billion, to $776 billion, citing better-than-expected tax receipts from the resilient domestic economy, some of which were deferred as part of disaster relief efforts in California. It also pegged its borrowing total for the first quarter of 2024 at around $816 billion. 

"Based on projected intermediate- to long-term borrowing needs, Treasury intends to continue gradually increasing coupon auction sizes in the upcoming November 2023 to January 2024 quarter," the Treasury said in a statement. "As these changes will make substantial progress towards aligning auction sizes with projected borrowing needs, Treasury anticipates that one additional quarter of increases to coupon auction sizes will likely be needed beyond the increases announced today."

Benchmark 10-year Treasury note yields were marked 5 basis points lower following the Treasury Department announcement and changing hands at 4.848%, while 2-year note yields eased to 5.044%.