Sina US stock news, November 12, Beijing time,J.P. MorganStrategist Jay Barry and others predict that by 2020, net investment in open market US debt will be 730 billion US dollars, lower than the 1.267 trillion US dollar forecast in 2019. The reason is that the Federal Reserve purchases treasury bonds and reinvests in the System Open Market Account (SOMA).

Strategists expect the federal budget deficit to expand to 1 trillion US dollars by FY2020, and there is room for growth in the next few years. The current auction schedule shows that the US Treasury is overfunded in 2020, which will cause US debt issuance to reach a negative 102 billion US dollars, the first time since 2014.

Strategists estimate that once the Federal Reserve replenishes its reserve balance, the purchase of treasury bonds will end. The Federal Reserve will adjust the pace to reflect the seasonality of note issuance; the average term for future treasury bill purchases is 5 months

The US Treasury is unlikely to cut the scale of coupon bond auctions to “cultivate a well-functioning treasury bill market,” but any price distortion on short-term treasury bonds “will be short-lived”

However, the US Treasury may experience insufficient funding in fiscal year 2021 and beyond, which increases the possibility that the scale of bond auctions will expand in late 2020 and early 2021

As the size of monthly auctions is already at an “all-time high,” this also increases the chances of the US Treasury launching new due dates or products