The median survey response forecasts total net Treasury bill, note and bond issuance of $125 billion in the first quarter of this year, 267 percent higher than the fourth quarter and 56 percent higher than a year ago. The year-over-year projected increase is consistent with a higher budget deficit forecast for this fiscal year, following an extended period of lower deficits as a result of tax revenue growth. The higher deficit projection of $228 billion for FY’08 reflects expectations of positive but below-trend economic growth over the coming year as the economy works through the effect of the extended housing sector weakness and credit market volatility. Relative to rates at the time the survey was taken, the median forecast projects Treasury yields to rise slightly over the next couple quarters from the historically low current levels. In addition, the Committee expects that the shape of the yield curve, which has steepened significantly over the last several months, will not change dramatically over the next few quarters, flattening slightly over the next quarter and moving back in the second quarter to the current 2-year to 10-year spread.

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 of Statistics: Charles Bartlett
• Director, Research: Tiffany Coln