For perhaps the first time since inflation started surging more than two years ago, the Federal Reserve's Open Market Committee (FOMC) meetin💧g this week will h✱ave competition for financial headlines.

🧸 The FOMC will announce its latest monetary policy decision and outlook Wednesday. But its ongoing campaign to fight inflation, boosting debt service costs for the federal government, has turned more and more eyes to U.S. Treasury securities, who🍌se yields have kept rising even as the Fed has paused increasing its benchmark lending rate.

That's why investors this week may turn more attention to the Treasury's quarterly 澳洲幸运5开奖号码历史查询:refunding process,🗹 which will reveal plans♈ for refinancing the U.S. government's outstanding debt.

In particular, investors will focus on how the federal government—now facing a budget deficit of $1.7 trillion as of Sept. 30, 2023—will manage issuance of Treasury securities to help cover that shortfall.

More Borrowing

The U.S. Treasury announced Monday it seeks to borrow $776 billion during the last three months of the year by issuing bonds. That number𓃲 was lower than what some analysts had expected but considerably higher than others.

For example, JPMorgan expected the Treasury🐻 to peg the net marketable securities borrowing at $800 in a report last week, while those at Oxford Economics pegged thaꦛt at $675 billion.

The bottom line, J.P. Morgan noted in a report last week, is that Treasury's current schedule for issuing new securities "is insufficient to meet its prospective financing needs."

That leaves💃 market watchers ✃seeking more clarity.

Investors seem confident that the Fed will hold rates steady on Wednesday. So their focus is on the Treasury announcement that will precede the Fed by a few hꦆours. The refunding process outlines the duration and quantity of bonds the government will auction through the quarter.

Funding Needs, Waning D🦋emand Drive Yields Higher

The expectation tꦍhat the U.S. Treasury will increase the size of upcoming auctions for both its short- and long-term securities has helped drive the yield on its benchmark 10-yea🔴r bond to the highest level in 16 years.

The 10-year yield has for the past two weeks and has surged more than 100 bps in the second half of the year. The bulk of that increase occurred since the beginning of September.

The Treasury already has said it plans to gradually increase auction sizes in coming quarters, and its previous quarterly announcement presaged the yield surge of the past two months.

Moreover, while the supply of Treasu♒rys gradually rises, demand has waned, reflecting reduced interest from large foreign buyers.

China's ownership of U.S. Treasurys dropped to $805 billion in August, the lowest since 2009 and 14% less than the same month last year. Japan, the largest holder of Treasurys, owned $1.1 trillion in August, down 7% from a year ago.

The Treasury's Problem

Again, the Treasury simply needs more money.

Rising interest rates have increased debt service costs when the Treasury rolls over existing debt. That has heightened the threat of a spiral in which it increases debt issuance, a෴t marginally higher and higher rates, to cover 🎉not much more than the expanding debt-service costs.

Most analysts think the Treasury this week will stick to an orderly increase of issuance amounts that it already has tried to ch𒆙oreograph.

JP Morgan forecasts total issuances for all ♌maturities will increase to $318 billion in November, rising to more than $400 billion by the middꩲle of next year.

Econo🌞mists with Oxford Economics generally conᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚcur.

"We expect increases of $3bn in the sizes of two-, five- and 10-year note auctions, $2bn in the sizes of 30-year note and two-year floating rate note auctions, and $1bn in the sizes of seven-year note and 20-year bond sales," Oxford economists said of the refunding this quarter.

From an annual perspective, however, the gradual monthly increase translates into something for more meaningful: JPMorgan anticipates the Treasury will issue $4.6 trillion in new debt in calendar year 2024, up 35% from an estimated $3.4 billion this year.🌞