SIFMA Issues Quarterly Government Securities Issuance and Rates Forecast for 1Q 2015
Release Date: January 29, 2015
Contact: Katrina Cavalli, 212-313-1181, [email protected]
SIFMA Issues Quarterly Government Securities Issuance and Rates Forecast for 1Q 2015
New York, NY, January 29, 2015 – SIFMA today issued its quarterly government securities issuance and rates forecast for the first quarter of 2015. The full report is available at the following link: http://www.sifma.org/govtforecast1Q2015/
Highlights of the forecast include:
The SIFMA Quarterly Issuance Survey forecasts total net Treasury bill, note, and bond issuance to be $170.0 billion in the first quarter of 2015, 25.2 percent lower than the $227.3 billion issued in 4Q’14 (actuals include cash management balances).
Survey respondents forecast that the Treasury will issue $37.0 billion of Treasury Inflation-Protected Securities (TIPS) in the first quarter of 2015, up 2.8 percent from the $36.0 billion issued in 4Q’14. Bid-to-cover ratios for TIPS have declined in recent years to an average of 2.5 in 2014 but they remain elevated relative to pre-2009 averages.
The median forecast for net issuance of Treasury coupon securities (notes and bonds) is $121.0 billion for the first quarter, 32.9 percent below the 4Q’14’s net issuance of $180.4 billion. Gross coupon issuance is expected to total approximately $528.0 billion, 2.5 percent below the $539.1 billion issued in the prior quarter. The gross issuance of notes and bonds is expected to be essentially flat for medium and long maturities, while the 2-year notes and 3-year notes are forecasted to fall by 7.1 percent and 7.7 percent, respectively.
Survey participants expect to see net bill issuance of $49.0 billion in the first quarter, 4.5 percent higher than the net issuance of $46.9 billion in the fourth quarter. The expectations for the net bill issuance in 4Q’14 varied widely among the survey respondents, showing no consensus in the direction or the scale of net bill issuance in 1Q’15 (the forecast ranged from the redemption of $25.0 billion to issuance of $150.0 billion).
In 4Q’14 the total issuance by the four largest Federal agencies stood at $100.0 billion, down 11.7 percent from $113.2 billion in 3Q’14. Survey participants forecast total gross coupon issuance by the four largest Federal agencies to increase by 12.0 percent to $112.0 billion in the first quarter of 2015. The projections reflect a decrease in Freddie Mac’s and Federal Farm Credit Banks’ issuance of 34.5 percent and 5.6 percent, respectively.
The survey asked participants about risks to their forecasts or events that could cause interest rates to move higher or lower than forecasted (summarized in the table on the left). The main risks to rates for both the upside and the downside have remained relatively the same over the last few quarters.
The main risks to the forecast identified on the upside (higher-than-expected yields) remained consistent from the previous quarter. One of the upside risks that seemed to be much more pronounce in this quarter’s survey was the unexpected acceleration in wage inflation. Other identified upside risks were stronger than expected Euro economic rebound in oil prices, and stronger than expected global growth.
In contrast, the main risks noted on the downside (lower-than-expected yields) were: US economic deterioration, monetary policy errors/delay of a rate hike, and fall in wage inflation.
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The Securities Industry and Financial Markets Association (SIFMA) brings together the shared interests of hundreds of securities firms, banks and asset managers. SIFMA’s mission is to develop policies and practices which strengthen financial markets and which encourage capital availability, job creation and economic growth while building trust and confidence in the financial industry. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA). For more information, visit www.sifma.org.