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The US Treasury announced that it expects to borrow USD 243bn in privately held net marketable debt. This figure is USD 41bn higher than the estimate in January and is somewhat surprising given that the Treasury’s cash balance is currently close to USD 1tn. In any case, an extra USD 41bn is a relatively small amount given the absolute size of the US budget deficit (2023 Federal budget deficit stands at USD 1.7tn). Further details will be announced on Wednesday, but it is likely that this larger borrowing requirement will largely be made up for by a corresponding increase in T bill issuances. In any case, there was little reaction in US yields on the upside borrowing surprise.
Against a backdrop of a still-wide fiscal deficit, the Fed is likely to announce QT taper at the upcoming FOMC meeting, dropping the pace to around USD 50bn / month. The intention to taper has been well telegraphed and there are two direct implications to rates. First, the liquidity drawdown would proceed at a slower pace, thereby lessening the risk of accidents in the repo space. Second, market participants will have less US Treasuries / Bills to absorb than it otherwise would have been. On balance, this should allay some concerns about the net supply of papers hitting the market.
Lastly, we are a tad wary that that Fed Chair Powell might sound hawkish. With market sentiment holding up relatively well so far, yields around current levels across tenors may be viewed as neutral. 
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