SIFMA Releases Government Issuance and Rates Forecast for 4Q 2015

Release Date: October 29, 2015
Contact: Carol Danko, 202-962-7390, [email protected] 

Fourth Quarter Bond Issuance Higher, Fed Interest Rate Hike Likely in December:
SIFMA Releases Government Issuance and Rates Forecast for 4Q 2015

Washington, DC, October 29, 2015—SIFMA today issued its quarterly government securities issuance and rates forecast for 4Q 2015. The full report is available at the following link:           

Total Issuance Outlook: 

The SIFMA Quarterly Issuance Survey  forecasts total net Treasury bill, note, and bond issuance to be $166.0 billion in the fourth quarter of 2015, 24.9 percent higher than the $132.9 billion issued in 3Q’15 (actuals include cash management balances). SIFMA’s forecast for the fourth quarter issuance of net marketable debt is much lower than Treasury’s August debt issuance estimate of $270.0 billion.  The net bill redemption in 4Q’15 is expected to be $30.0 billion compared to the $37.0 billion redeemed during the third quarter, while the net issuance of coupons is expected to be $196.0 billion, a 15.4 percent increase from $169.8 billion issued in the previous quarter. 

U.S. Treasury net issuance, including CMBs, increased significantly to a net $132.9 billion in the third quarter, more than double the $56.6 billion in the previous quarter and 4.6 percent above the Treasury’s August net borrowing estimate of $127.0 billion , but a 35.0 percent decrease from 3Q’14’s net issuance of $204.5 billion. 

Monetary Policy Outlook: 

During the most recent FOMC meeting in October 2015, the Committee judged that the economic growth expanded at a moderate pace in summer months, the labor market continued to improve with solid job gains and falling unemployment rate and growth in household spending was moderate. 

This quarter the survey asked the participants when they expect the Fed to raise the target rate. Majority of respondents (80 percent) expect the first rate hike to come in December 2015 with the remaining votes (20 percent) pointing to March 2016 as the more likely time the Fed raises the target rate. 

U.S. Treasury Yield Outlook: 

In 3Q’15, the Treasury yields decreased for almost all maturities with larger decreases in the medium term securities. Two-year rates stayed flat at 0.64 percent at the end of September, the 5-year yields decreased to 1.37 percent in 3Q’15 from 1.63 percent in the end of June, the 10-year yields decreased to 2.06 percent from 2.92 percent in 2Q’15, and 30-year yields decreased to 2.87 percent in September 2015 from 3.11 percent in June.  

Survey respondents forecast benchmark yields to continue gradually increasing across all maturities through the end of 2015 and in the first quarter of 2016. The 2-year Treasury yields are expected to increase to 0.83 percent by December 2015 and further to 0.95 percent by March 2016. Five-year yields are projected to increase to 1.63 percent and then increase to 1.73 in 1Q’16. Similarly, for 10-year maturities, survey responders expect a gradual increase to 2.23 percent and 2.28 percent at the end of December and march, re-spectively, while 30-year yields are expected to increase to 2.95 percent and further to 2.98 in 1Q’16. 

Upside and Downside Risks: 

The survey asked participants about risks to their forecasts or events that could cause interest rates to move higher or lower than forecasted. 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: stronger pickup in inflation, more hawkish Fed, stronger than expected rebound in employment, acceleration in wage inflation and stronger than expected recovery in oil prices.  

In contrast, the main risks noted on the downside (lower-than-expected yields) were: US and global economic deterioration, strengthening US dollar, and persisting low oil prices. 

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SIFMA is the voice of the U.S. securities industry, representing the broker-dealers, banks and asset managers whose 889,000 employees provide access to the capital markets, raising over $2.4 trillion for businesses and municipalities in the U.S., serving clients with over $16 trillion in assets and managing more than $62 trillion in assets for individual and institutional clients including mutual funds and retirement plans. 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