What the latest US Treasury QRA means for the economy & markets
A decline in outstanding T-bills is set to exacerbate Fed tightening, but the market impact of increased net coupon supply is nuanced, with gross issuance likely below market expectations.
Executive summary
After seven consecutive quarters of material net T-bill issuance, the level of outstanding T-bills is expected to fall by over $300bn in 2Q24. Meanwhile, net coupon issuance is expected to rise above $500bn in 2Q24.
When net T-bill issuance is funded by withdrawals from the Fed’s RRP facility, and this is used to fund the government defi…