Let's revisit the weird optics of this Thursday's 5Y TIPS auction! 🧵 Auctions of new 5Y TIPS have been held twice a year -- in April & October -- since 2019. (The June and Dec 5Y TIPS auctions are reopenings of one or the other.)

Quarterly refunding announcement tomorrow at 8:30am! Documents are housed here:

home.treasury.gov/policy-issues/… Treasury Department will announce the sizes of next week's 3Y, 10Y & 30Y auctions, and customarily projects other auction sizes for the May-July period. For 10Y, 20Y and 30Y, quarterly new issues in Feb, May, Aug and Nov are expanded via 2 reopenings in the intervening months.

Let's talk about tomorrow's Treasury quarterly announcement, at 8:30am.

This is where @USTreasury announces the sizes of next week's 3Y, 10Y & 30Y auctions, and customarily projects other auction sizes over the Feb-April period. 🧵 Every note and bond has a monthly auction, but the quarterly pattern exists because new 10Y, 20Y & 30Y securities are introduced in Feb, May, Aug and Nov, and expanded via reopening auctions in the intervening months.

No one asked for my opinion, but since most of the Treasury market veterans I talk to are not on this website, I think the conversation about the potential to modify the auction schedule to evade the debt ceiling has been missing a piece. 🧵 The notion I’m referring to, which has been advanced by the great @IvanTheK and @matt_levine, among others, is that Treasury could issue debt with above-market coupons at premium prices.

Let's talk about tomorrow's Treasury quarterly refunding announcement. Docs housed here:

home.treasury.gov/policy-issues/… This is where the Treasury Dept announces the sizes of next week's 3Y, 10Y & 30Y auctions, and customarily projects other auction sizes over the Nov-Jan period.

Let's talk about how inflation is mucking up the size of the Fed's bond portfolio.

I did a story about it⬇️ but since you people apparently like threads, and we all strive to give the people what they want, here we go. 🧵

bloomberg.com/news/articles/… via @markets Under the QT plan announced in May, the Fed June 1 started letting $30b a month of its Treasuries roll off. Meaning: it subtracted $30b from the total amount of maturing notes & bonds & reinvested the rest via auctions.

Let's talk about what happened in TIPS (inflation-protected #Treasuries) at the end of the US trading day yesterday. 🧵 What we *know* happened is that benchmark yields -- already higher on the day -- shot up quite a bit more between 3pm and 4pm, with the 5Y reaching a YTD high.

Let's talk about tomorrow's Treasury refunding announcement. This is where the Treasury Department announces the sizes of next week's 3Y, 10Y & 30Y auctions and, by convention, projects all coupon auction sizes for a three-month period, in this case Aug-Oct. 🧵 Related documents are housed here:

home.treasury.gov/policy-issues/…

Let's talk about the big yield differentials that crop up for 5Y TIPS new-issue auctions, in April and October. It's been happening since the October new issue was introduced in 2019 (and I've tweeted about it before), but this time it's really spectacular. 🧵 The U.S. Treasury is selling $20b of 5Y TIPS on Thursday. They're trading on a notional basis at around -0.42%, about 23.5bp higher than the most recently issued 5-year TIPS, which came out in October. That's a lot! Let's unpack it.

Let's talk about unscheduled reopenings of Treasury securities, since we're on the cusp of a big one! 🧵

The U.S. Treasury sells each of its nominal coupon securities (2Y, 3Y, 5Y, 7Y, 10Y, 20Y, 30Y) monthly. For the 2Y-7Y, each monthly auction is normally a unique issue. For the 10Y-30Y, a unique issue is introduced quarterly in Feb, May, Aug and Nov & expanded via scheduled reopenings in the intervening months.

A Rant About Treasury Repo

I've kept this bottled up for a long time. 1/ Repo is a bugbear even for most financial journalists. Not just because the terminology can be confusing, but also because there's no detailed market data that's public. Let's break it down. 2/

This is a good day to discuss how Treasury auctions get graded based on the WI yield. In 7 tweets.

https://twitter.com/BChappatta/status/1453416647184863235

As noted, today's 5-year auction drew 1.157%, a yield about 2.5bp lower than the WI yield at the 1pm bidding deadline, a historically big miss and a sign that demand exceeded dealer expectations.

This is a good day to explain how specific TIPS breakeven inflation rates are calculated. 1/ For any given TIPS, the breakeven rate is normally the difference between its yield and the yield of the nominal Treasury with the closest maturity date. 2/

Time for a look at tomorrow's 5Y TIPS new-issue auction. $TIP #Treasuries 1/ The last couple of October 5Y TIPS auctions (in 2020 and 2019) went off at yields significantly lower than the yields on the previous issue, from April, despite maturing six months later. 2/

A thread about Treasury Index month-end duration extensions 1/ On the last business day of the month, usually at 3pm, bond indexes get rebalanced. Securities issued during the month that fit the index criteria get added, and ones that no longer fit (most notably, ones that mature in less than a year) come out. 2/