{"id":79744,"date":"2023-11-02T08:03:55","date_gmt":"2023-11-02T12:03:55","guid":{"rendered":"https:\/\/ifintechworld.com\/investing\/treasury-refunding-announcement-boosts-stocks-and-bonds-heres-why\/"},"modified":"2023-11-02T08:04:00","modified_gmt":"2023-11-02T12:04:00","slug":"treasury-refunding-announcement-boosts-stocks-and-bonds-heres-why","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=79744","title":{"rendered":"Treasury Refunding Announcement Boosts Stocks and Bonds. Here\u2019s Why."},"content":{"rendered":"
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Not long ago, the Treasury refunding announcements were treated like an afterthought by most except the biggest financial-market junkies.<\/p>\n

Those days seem long gone. Now, they are moving stocks and bonds. <\/p>\n

\n

That was certainly the case on Wednesday, when the U.S. Treasury decided to moderate sales of its longer-dated debt, a move that helped push bond yields down significantly and provided support for stocks. Reduced yields prop up the value of bonds already in investors\u2019 portfolios.<\/p>\n

The department on Wednesday said it would sell $112 billion in long- and medium-term securities in its coming auctions. It increased the amount of\u00a0<\/strong>bonds and notes on offer, but dialed back the increase in 10-year and 30-year auctions compared with the amount laid out in August. Sizes for both coupons were $1 billion lower than what had been announced in August. <\/p>\n

In the past, Treasury refunding announcements would go unnoticed by markets but\u00a0<\/strong>the larger than expected borrowing announcement in the third quarter changed things.\u00a0<\/strong>It sent the 10-year and 30-year yields higher, forcing Americans to pay more for their mortgages, credit card balances, and bank loans<\/p>\n

Yields have been rising since then, with those on the 10-year note and the 30-year bond hitting their highest level since 2007 in October, causing the value of bonds and notes to fall sharply. The
\n iShares 20+ Year Treasury Bond exchange-traded fund
\n (ticker: TLT) has fallen 14% so far this year. <\/p>\n

Now, reduced supply on the long-end is causing the opposite. Yields fell Wednesday after Treasury officials cited the historic climb in yields, and the \u201cterm premium,\u201d the extra compensation demanded to hold longer-dated bonds, as reasons for being less aggressive with issuance. Officials also noted possible \u201cearly evidence of waning demand\u201d as demonstrated by the weak reception at the 30-year auction this month. <\/p>\n

Fewer bonds available in the market suppresses yields because investors may compete to buy those bonds.<\/p>\n

Treasury expects one more quarter of larger auctions, although \u201cwe suspect the risk is tilted toward a more measured approach going forward,\u201d wrote Ben Jeffery, an interest rate strategist at BMO Capital Markets. <\/p>\n

The Treasury has historically followed a principle of being \u201cregular and predictable\u201d and Wednesday\u2019s move to replicate increases for most debt appears to be in line with its commitment to consistency.<\/p>\n

With respect to Treasury bills, or debt maturing in under a year, the Treasury said it \u201cexpects to maintain bill auction sizes at current levels into late-November.\u201d <\/p>\n

The T-bill share of the market is already elevated\u201421% of the market compared to the recommended range of 15% to 20%\u00a0<\/strong>set by the Treasury Borrowing Committee in November 2020. It\u2019s expected to remain above the range at least until the end of January, said Joshua Frost, who is assistant secretary of the Treasury. <\/p>\n

The yield on the 10-year Treasury, which hit a 16-year high of 4.987% on Oct. 19, closed at 4.790% on Wednesday. The 30-year bond fell to 4.974%, after closing at 5.024% on Tuesday. <\/p>\n

The equity markets closed with gains: The
\n S&P 500
\n was up 1.1% and the tech-heavy
\n Nasdaq Composite
\n was up 1.6%.The
\n Dow Jones Industrial Average
\n gained 221 points, or 0.7%.<\/p>\n

The reaction makes sense. In the past few months, stock prices and bond yields have typically moved in opposite directions. With news of lower-than-predicted supply on the long end, yields get suppressed while equities or risky assets charge ahead. <\/p>\n

To be sure, the Federal Reserve\u2019s decision to pause as well as Purchasing Managers Index, or PMI, coming in lower may have influenced the moves as well and there\u2019s no way to quantify the precise impact of each announcement. <\/p>\n

Let\u2019s see if they last.<\/p>\n

Write to Karishma Vanjani at\u00a0karishma.vanjani@dowjones.com.<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Not long ago, the Treasury refunding announcements were treated like an afterthought by most except the biggest financial-market junkies. Those days seem long gone. Now, they are moving stocks and bonds. That was certainly the case on Wednesday, when the U.S. Treasury decided to moderate sales of its longer-dated debt, a move that helped push […]<\/p>\n","protected":false},"author":1,"featured_media":79745,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"video","meta":{"footnotes":""},"categories":[239],"tags":[83],"class_list":["post-79744","post","type-post","status-publish","format-video","has-post-thumbnail","hentry","category-investing","tag-featured","post_format-post-format-video"],"yoast_head":"\nTreasury Refunding Announcement Boosts Stocks and Bonds. 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