New bill issuance could reach about $1.4 trillion through the end of 2023, with roughly $1 trillion flooding the market before the end of August, according to an estimate from Bank of America Global strategists. They expect the deluge through August to be about five times the supply of an average three-month stretch in years before the pandemic.
“The good news is that we have a high degree of confidence around who is going to buy it,” said Mark Cabana, rates strategist at BofA Global, in a phone interview with MarketWatch. “The bad news is that it’s not going to be at current levels. Things have to cheapen.”
Cabana sees a key buyer of bill supply unleashed by a debt-ceiling deal in money-market funds, which have climbed to nearly $5.4 trillion in assets managed since the regional banking crisis erupted in March.
George Catrambone, head of fixed income Americas at DWS Group, expects money-market funds, foreign buyers and other institutions auctions to continue as buyers in the market: “There’s always buyers. It’s a question of price.”
Lindsay Rosner, senior portfolio manager at PGIM Fixed Income, expects longer-dated Treasury yields to increase. She has been avoiding ultrashort Treasuries in the eye of the debt-ceiling fight in favor of 2, 3 or 4-year bonds offering some of the highest yields in years: “We’re being afforded good yield, good spread, a couple of years out the curve. Play that game.”