It was a fairly rates hawkish QRA statement from the US Treasury yesterday. They even included a small uptick in Q2 funding needs (surprising me), while the Q3 net issuance target is >800bn, which we listed as a threshold for a rates hawkish reaction… Not much help for the BoJ and/or PBoC from the US Treasury here.

Hopes of Yellen aiming for a lower TGA ahead of the election also ended in tears, as the TGA target is INCREASED to 850bn in Q3 (which makes sense given an increased deficit trend).

Accordingly, it makes sense that the USD vs Asian FX is bid again this morning. We remain on CNY alert accordingly, especially as the CNY rates have calmed down after the PBoC cash injection, meaning that USD-CNY rates spreads will be allowed to increase again from here.

Details below from the QRA statement are found below:

“During the April – June 2024 quarter, Treasury expects to borrow $243 billion in privately-held  net marketable debt, assuming an end-of-June cash balance of $750 billion.

The borrowing estimate is $41 billion higher than announced in January 2024, largely due to lower cash receipts, partially offset by a higher beginning of quarter cash balance.

During the July – September 2024 quarter, Treasury expects to borrow $847 billion in privately-held net marketable debt, assuming an end-of-September cash balance of $850 billion.”

Chart 1: QRA details