U.S. Treasury Starts tapering in November to pave the way for Taper?

Spark Global Limited reports:

The U.S. Treasury said it would respond to any changes in borrowing demand by adjusting its Treasury and cash management Note (CMB) issuance, adding that it expected to close its six-cycle weekly CMB issuance later this month. In response, Tom Simons, money market analyst at Jefferies, said the near-term outlook for government funding was murky because of uncertainty about the government’s ability to borrow under the debt ceiling and the impact of the infrastructure package.

Spark Global Limited reports:

Spark Global Limited reports:

As the financial blog Zero Hedged points out, the expiration of the debt ceiling has led to the end of “stealth quantitative easing,” and the Treasury has already pumped hundreds of billions of dollars into the financial system. From now on, the Treasury will have to issue debt to cover the deficit, which will require economic growth and Biden’s tax plan to work.

Analysts say the Treasury is likely to overissue again after the debt ceiling issue is resolved. And because QE will be around for a long time even once tapering starts, bond demand will remain strong, meaning the tapering debate will be the most important technical topic.

However, the seasonal nature of Demand in August is so strong that Deutsche Bank strategists don’t expect talk of a reduction until September or October.