The median survey response forecasts net Treasury bill, note and bond issuance to be $(500) million in the second quarter of this year, lower than the first quarter of 2008, but higher than the second quarter a year ago. The year-over-year projected increase (that is, lower paydown) is consistent with the higher budget deficit forecast for this fiscal year, following an extended period of lower deficits as a result of significant tax revenue growth. The lower net issuance volume compared to the first quarter is primarily the result of the seasonal effect of tax revenue inflows peaking in the second quarter which includes the April 15 tax deadline. The gross Treasury issuance forecast, which is projected to be lower than last quarter, is affected by expected refundings of maturing and callable debt as well as Treasury’s new cash needs. The median forecast also projects the 2-year Treasury yield to decline and 10-year yield to rise slightly over the next couple quarters from historically low current levels. In addition, the committee expects the shape of the yield curve to continue to steepen over the next few quarters from the current 2-year to 10-year Treasury yield spread. The steeper yield curve suggests continued heightened investor risk sensitivity.

About the Report

A quarterly survey of SIFMA’s Primary Dealers and Government Securities Research and Strategist Committees concerning U.S. government issuance and rates forecasts. The committees are composed of trading strategists and research analysts at SIFMA member firms who specialize in the U.S. government and agency securities markets. The survey is intended to provide market participants with the current consensus expectations and median forecasts of many of the primary dealers and other firms active in the U.S. government and agency securities markets.

Credits

SIFMA Capital Markets

• Staff Advisor: Rob Toomey

SIFMA Research

• Senior Managing Director, Research and Public Policy: Michael Decker
• Staff Advisor: Steven Davidson
• Director, Research: Tiffany Coln