Treasury in Flux to Maintain Bond Auction Sizes as Mnuchin Waits

  • Non-political staff members oversee Treasury refunding
  • Key debt roles held in wait as Mnuchin confirmation pending

The U.S. Treasury is expected to maintain long-term debt sales this quarter, presenting stability for the markets as President Donald Trump’s pick to head the department, Steven Mnuchin, awaits Senate confirmation.

Career public servants in Treasury will be in charge on Wednesday of announcing upcoming note and bond auctions by the world’s biggest debt issuer, after about 300 political appointees, including three key officials overseeing debt management, left their posts. With leadership shifting to Trump’s week-old administration, questions remain about his fiscal vision, leaving observers to anticipate a steady debt issuance policy.

“They are very much in the transition phase and the folks that are still there from the old regime -- presumably mostly career folks -- are just kind of minding the fort,” said Stephen Stanley, New York-based chief economist at Amherst Pierpont Securities LLC. “I don’t think you are going to see any major initiatives.”

Change may be coming. Bond markets are waiting for clues on Trump’s plans for tax cuts, deregulation and increased spending, which his team says will produce faster growth that will help limit the budget deficit. Mnuchin, shortly after his nomination, said he’d consider introducing issuing U.S. Treasuries maturing in more than 30 years, the current maximum.

The Senate Finance Committee will vote on Mnuchin’s nomination on Monday, before the final confirmation would go to a full Senate vote. In the meantime, Adam Szubin, who has worked at the department for more than a decade, is serving as acting secretary, although some members of Mnuchin’s team are already working at the Treasury.

Monique Rollins, a career staff member, is serving as acting assistant secretary for financial markets, replacing Daleep Singh, and she will brief journalists during Wednesday’s announcement, according to a Treasury official. Goldman Sachs Group Inc. Jim Donovan is said to be the front-runner for the job of Treasury’s undersecretary of domestic finance.

Read about Congress’s role in raising the debt ceiling

The Treasury is set to sell $24 billion in three-year notes on Feb. 7, $23 billion in 10-year notes on Feb. 8 and $15 billion in 30-year bonds on Feb. 9, according to Societe Generale SA. That will mark the fifth straight quarter the Treasury has held longer-term debt issuance stable. The government has been addressing seasonal changes in borrowing by adjusting bills -- government securities that mature in up to one year. Treasury will announce its latest quarterly borrowing needs on Monday.

“There is very little concrete information yet from the new administration on their policies and what impact they will have on Treasury’s future borrowing needs,” said Subadra Rajappa, head of U.S. interest-rate strategy at Societe Generale SA in New York. “Given that, it will be very hard for the Treasury to think about things like how they may change the composition of their debt issuance.”

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