Deck 3 — Treasury Supply

Why does greater Treasury supply tend to raise long yields?

More bonds must be absorbed. If demand does not rise equally, prices fall and yields rise to attract buyers.

Why does issuance maturity matter?

Long-term issuance matters more because investors must take more interest-rate risk, so they may demand higher yields to buy it.

What if Treasury finances more of the deficit with bills?

If Treasury issues more bills instead of long-term bonds, investors absorb less duration risk, so the upward pressure on the 10-year yield is weaker.

What if Treasury increases coupon auction sizes?

If Treasury sells more long-term notes and bonds, investors may demand higher yields to absorb the extra supply.

What is an auction tail?

means Treasury had to offer a slightly higher yield than the market expected to sell all the bonds.

What does a large dealer take-down suggest?

Dealers had to absorb more supply because end-investor demand was weaker.

How should I describe TBAC safely?

Projected financing needs increase the likelihood of larger coupon issuance, but Treasury controls the timing and maturity mix.