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?

Bills add little long-end duration, while 10-year and 30-year issuance place much more interest-rate risk into the market.

What if Treasury finances more of the deficit with bills?

That would reduce long-end duration supply and weaken upward pressure on the 10-year term premium.

What if Treasury increases coupon auction sizes?

More long-duration supply must be absorbed, which can raise term premium if demand does not strengthen equally.

What is an auction tail?

An auction clears at a higher yield than expected immediately before the auction, often signaling weaker demand.

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.