U.S. Treasury Secretary Steven Mnuchin is increasing the amount of debt he plans to issue in quarterly refunding auctions to a record high of $96 billion to provide government funding as the economy heads into a recession caused by the coronavirus.
The departmentannounced plans Wednesday to auction the first re-booted 20-year bond on May 20, with an expected initial offering size of $20 billion — larger than most analysts expected — and unveiled plans to boost overall issuance with a focus on increases to longer-term debt.
Mnuchin’s unprecedented debt issuance comes as the Trump administration braces forwhat they see as a 40% contraction in economic growth in the second quarter. The U.S. federal deficit is set to surpass estimates of $4 trillion for this year as lawmakers discuss additional economic stimulus.
“It’s pretty amazing that they are doing this much in the long end,” said Tom di Galoma, managing director of government trading and strategy at Seaport Global. “Treasury is trying to take advantage of the very low long-term rates.”
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