Supply of US Treasuries set to almost double to $1tn in 2018 - FT

According to a story carried by the Financial Times (FT) on Monday, the US fixed-income earners could see a turbulent year ahead, as the supply of the US Treasury bonds are expected to more-than double to $ 1 trillion in 2018.

Key Points:

“The US government’s rising budget deficit, President Donald Trump’s tax cuts and the Federal Reserve’s push to shrink its balance sheet as it reverses the post-financial crisis bond-buying programme are some of the reasons behind the expected increase.

In addition, the amount of investment grade and high-yield bonds issued by US companies that will mature and require refinancing is forecast to increase significantly over the next two years. As a result, total US fixed-income supply could rise from $1tn last year to just over $2tn in 2019, according to Deutsche’s forecasts.

In addition, the European Central Bank and Bank of Japan are both expected to withdraw from their post-crisis quantitative easing programmes. This could exacerbate a weakness in demand for US bonds among international investors.”