More Treasury Bonds on the Way

The Department of the Treasury issues bonds all the time, but it’s going to start issuing more bonds than in the past. The plans won’t be announced until January 31. But this article says that most market experts expect the issuance of treasury bonds to increase a lot. That’s not good timing, because the Federal Reserve reduced its bond buying program a few years ago and now is going to let part of its portfolio of bonds mature each month without replacing them. That means more bonds are being issued, but there are fewer buyers. The result could be higher interest rates.

The latest projections from analysts show where that clearing price may be. Forecasters see 10-year yields reaching 2.9 percent by year-end, from about 2.6 percent now. Yields have already climbed more than a half-percentage point since early September, to the highest since 2014.

America was already on course to go deeper into the red to pay for rising Social Security and Medicare expenses and mounting interest costs on its debt. That trend got added fuel from the tax overhaul passed last month. Treasury also faces more borrowing as the Fed steps up its balance-sheet runoff.