We have a very interesting day ahead of us in terms of the publication of important data and monetary decisions in the US. In addition to the final PMI data, ADP and JOLTS readings, as well as the key FOMC decision (along with Powell’s conference call immediately following it), investors will also learn about the latest announcements regarding US Treasury debt.

The Fed’s ongoing economic tightening cycle has increased the cost of servicing the federal government’s debt, which, combined with high uncertainty in this sphere (further saturated by the massive financial support of war-stricken Israel and Ukraine), is raising yields on government debt instruments to levels not seen since the 2007-2008 crisis. 

The U.S. Treasury has communicated that it will hold a $776 billion debt auction in the last quarter of 2023. The key variables that markets will be watching are the actual size of the auction, as well as the maturity dates.

The fundamental question, however, is what comes next. The Treasury has already announced that it plans to gradually increase the size of auctions in the coming quarters, and its previous quarterly announcements have correlated with the rise in debt securities yields over the past few months.

At the moment, TNOTE remains in the zone of local minima at the level of 106. Today’s readings of macro data, the tone of the FOMC decision and details of new Treasury auctions may decide whether the downward trend on this instrument will be maintained, or whether, however, the quotes of debt securities will rebound.

Source: xStation