Treasury bond sales strategy remains unchanged for the next quarter as political considerations from the upcoming midterm elections deter any adjustments, according to JPMorgan.
JPMorgan expects the Treasury to keep auction sizes unchanged in the next refunding, citing political risk from the upcoming midterms. Steady supply removes a potential upward catalyst for yields, supporting Treasury prices.
Limiting supply reduces upward pressure on yields, supporting bond prices in the near term.
Unlikely, as the Treasury values independence, but a fiscal emergency could force action.
Without supply changes, yields may track economic data; 4.50% on US10Y is a key resistance.
JPMorgan advises that the Treasury will avoid tweaking its quarterly refunding announcement to keep bond sales steady ahead of the November midterms. Political sensitivities around interest rates and market stability are prompting the Treasury to adopt a wait-and-see approach, deferring any adjustments until after the elections. The decision maintains the status quo for coupon-bearing Treasury supply, supporting near-term stability in bond markets.
It's when the Treasury details its borrowing needs and auction sizes for the upcoming quarter, influencing bond supply.
Changing issuance could be seen as influencing interest rates or the economy, which might be politically contentious ahead of elections. The Treasury aims to avoid any perception of partisanship.
JPMorgan is a major dealer; their prediction reassures markets that supply will not be surprising, potentially calming yields.