US Treasury Department Seeks Feedback on Auctions and Buyback Program

The U.S. Treasury Department seeks feedback from primary dealers on bond auctions and a potential buyback program. Get insights on their plans to enhance the bond market and address liquidity concerns.

Jul 14, 2023 - 12:33
Jul 14, 2023 - 12:34
US Treasury Department Seeks Feedback on Auctions and Buyback Program
US Treasury Department Seeks Feedback on Auctions and Buyback Program

In an effort to enhance its bond market operations, the U.S. Treasury Department has initiated a comprehensive survey among primary dealers. The survey aims to gather insights on the specific bonds that should be prioritized for issuance and to gather feedback on the potential implementation of a bond repurchase program.

Recognizing the need for potential adjustments as early as August, the Treasury plans to modestly increase the size of certain coupon-bearing debt auctions. To ensure effective management across the Treasury curve, banks are being consulted on which maturities should experience size increases.

The Treasury is also seeking feedback on the possibility of increasing sales of floating-rate notes and Treasury Inflation-Protected Securities (TIPS) as part of its funding strategy.

In addition to its focus on auction plans, the Treasury is keen on exploring the details of a bond repurchase program scheduled for a 2024 launch. This program aims to address liquidity concerns in the market, which have been aggravated by the market's expansion, Federal Reserve interest rate adjustments, and regulatory changes in the banking sector.

To inform the design of the repurchase program, the Treasury is asking for opinions on potential exclusions from buyback operations. Factors such as securities' status as cheapest-to-deliver in futures contracts, their trading premiums in the repurchase agreement market, and their recent issuance dates are being considered.

Furthermore, the Treasury is interested in evaluating the volume of outstanding securities in the private market as a basis for potential exclusions. The survey also seeks insights on evaluating offers submitted in buyback operations and the associated risks and benefits of comparing offers to market prices or relative value measures. The goal is to identify which securities would benefit the most from liquidity support.

The survey is part of the Treasury's regular engagement with primary dealers before quarterly refunding announcements. It serves as a valuable opportunity to gather feedback on market conditions and operations, ensuring informed decision-making to support the efficient functioning of the bond market.

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