US Rates Strategy: August refunding preview

Research evidence excerpt

US Rates Strategy: August refunding preview

$795bn of privately-held net marketable borrowing needs in the July-

September quarter, and $673bn next quarter.

At the last quarterly refunding, Treasury stated it expected to maintain nominal coupon

and FRN auction sizes at current levels for at least the next several quarters. Hence, we

expect Treasury to make no changes to planned auction sizes over August-

October 2026. Treasury is well-positioned to meet its near-term financing needs via T-

bills. Treasury has sharply increased front-end bill auction sizes in recent weeks, and sizes

are projected to remain stable until early September, when issuance is likely to be

reduced ahead of the corporate tax date (Figure 1Weprojectnetbilisuance(netofFedpurchases)tototal$35bnfromnowuntiltheendofAugust). On net, we project net bill issuance

(net of Fed purchases) to total $355bn from now until the end of August. Bill demand

remains robust, with MMF AUM up $127bn YTD, at $7.86tn (Figure 10MFAUMhasdeclinedinthelasttwoweksbutremains$127bnhigherYTDat$7.86tn).

Figure 1: We project net bill issuance (net of Fed purchases) Figure 2: Beyond the end of the current fiscal year, we see a

to total $355bn from now until the end of August larger financing gap opening up in FY27 and beyond

om now until the end of August f th

t b

nd o

ne

he e

ct

nd t

e

eyo

roj

B

e cu rren t fi scal yea

We p

ill is suance (net of Fed purch ases) to tot al $35 5bn fr r, we see a larger financing gap opening up in FY27 and beyond

Source: US Treasury, UBS Source: US Treasury, UBS

Beyond FY2026, a larger financing gap emerges. As Figure 2Beyondtheendofthecurentfiscalyear,wesealargerfinancinggapopeningupinFY27andbeyond shows, the borrowing