US: US treasury bond management policy gradually moves towards Japanese-like
2024-02-08
■ The cash reserve of the US Treasury has been restored and plans to end the continuous issuance of US treasury bonds since last year in April.
■To improve the liquidity of issued bonds, a repurchase plan is planned to be launched in the second half of this year.
The US Treasury Department released its (Marketable Borrowing Estimates) on January 29th, announcing a market financing plan of $760 billion as of the end of March and $2020 billion as of the end of June. The financing plan for the end of March has been lowered compared to last October's $816 billion. Due to the cash reserves reaching $769 billion as of the end of December last year, exceeding the expected $750 billion, the Department of the Treasury plans to maintain the current level after the end of March, indicating that the reduced cash reserves at the end of last year have been restored during negotiations in the US Congress on the federal debt ceiling issue. During the period from April to June, due to seasonal factors such as increased taxes, the financing amount will significantly decrease, and it is expected to increase again after the period from July to September. According to this plan, the (Quarterly Refunding Statement) released on January 31 shows that additional issuance will be carried out in all years except 20 years, and the additional issuance is planned to end in April. Afterwards, the plan is to transition to an issuance with a scale equivalent to the 2–4-month period after May. The trend of continued issuance of US treasury bonds will slow down slightly, and concerns about the structural deterioration of the supply and demand balance may ease.
The US Treasury Department plans to launch the buyback (purchase and elimination of US treasury bonds) plan in the second half of this year. It plans to carry out a small number of trials in April and plans to announce the detailed schedule of the next round of treasury bond issuance plan in May. In the treasury bond market, which is a relative trading market rather than a securities trading market, the trading of newly issued bonds (On the run bonds) is active, but the buyers of bonds (Off the run bonds) that have been issued for sometime time are reduced, and the bid-ask spread (transaction cost increase) is more obvious. By becoming a buyer of issued bonds through repurchase by the Ministry of Finance, and encouraging trading, it is expected to achieve effective trading and correct abnormal changes in the yield curve by increasing market liquidity. However, since repurchase as a means of financing will lead to an increase in the issuance of new treasury bonds, its impact on the overall US treasury bond market is neutral.
In Japan, the Ministry of Finance has implemented purchase and elimination policies and included bond issuance as a source of funding in its planning. On the contrary, to supplement the scarce issued bonds in the market, regular liquidity supply bidding is also conducted. These measures are implemented as part of the treasury bond management policy to maintain the stability of the treasury bond market. As the increase in government debt leads to the expansion of the treasury bond market, these measures are more necessary. The US treasury bond market has gradually adopted policies similar to those of the Japanese treasury bond market, suggesting that it will become increasingly difficult to maintain the stability of the treasury bond market without public intervention
■To improve the liquidity of issued bonds, a repurchase plan is planned to be launched in the second half of this year.
The US Treasury Department released its (Marketable Borrowing Estimates) on January 29th, announcing a market financing plan of $760 billion as of the end of March and $2020 billion as of the end of June. The financing plan for the end of March has been lowered compared to last October's $816 billion. Due to the cash reserves reaching $769 billion as of the end of December last year, exceeding the expected $750 billion, the Department of the Treasury plans to maintain the current level after the end of March, indicating that the reduced cash reserves at the end of last year have been restored during negotiations in the US Congress on the federal debt ceiling issue. During the period from April to June, due to seasonal factors such as increased taxes, the financing amount will significantly decrease, and it is expected to increase again after the period from July to September. According to this plan, the (Quarterly Refunding Statement) released on January 31 shows that additional issuance will be carried out in all years except 20 years, and the additional issuance is planned to end in April. Afterwards, the plan is to transition to an issuance with a scale equivalent to the 2–4-month period after May. The trend of continued issuance of US treasury bonds will slow down slightly, and concerns about the structural deterioration of the supply and demand balance may ease.
The US Treasury Department plans to launch the buyback (purchase and elimination of US treasury bonds) plan in the second half of this year. It plans to carry out a small number of trials in April and plans to announce the detailed schedule of the next round of treasury bond issuance plan in May. In the treasury bond market, which is a relative trading market rather than a securities trading market, the trading of newly issued bonds (On the run bonds) is active, but the buyers of bonds (Off the run bonds) that have been issued for sometime time are reduced, and the bid-ask spread (transaction cost increase) is more obvious. By becoming a buyer of issued bonds through repurchase by the Ministry of Finance, and encouraging trading, it is expected to achieve effective trading and correct abnormal changes in the yield curve by increasing market liquidity. However, since repurchase as a means of financing will lead to an increase in the issuance of new treasury bonds, its impact on the overall US treasury bond market is neutral.
In Japan, the Ministry of Finance has implemented purchase and elimination policies and included bond issuance as a source of funding in its planning. On the contrary, to supplement the scarce issued bonds in the market, regular liquidity supply bidding is also conducted. These measures are implemented as part of the treasury bond management policy to maintain the stability of the treasury bond market. As the increase in government debt leads to the expansion of the treasury bond market, these measures are more necessary. The US treasury bond market has gradually adopted policies similar to those of the Japanese treasury bond market, suggesting that it will become increasingly difficult to maintain the stability of the treasury bond market without public intervention