The US Treasury reopens its 20-year bond to help fund $3 trillion in 2nd-quarter borrowing

• The US Treasury Department will auction a 20-year bond in May for the first time since 1986, according to a Wednesday press release.
• The department is reopening the bond and increasing sizes of other issuances as it plans to borrow $3 trillion in the second quarter for rising stimulus costs.
• The Treasury also plans to shift its issuance concentration to longer-dated notes to limit volatility and capitalize on low rates.
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The US Treasury Department will issue a 20-year bond in May for the first time since 1986 to help fund a sharp increase in government spending.

The department announced on Monday it plans to borrow $3 trillion in the second quarter to foot the bill for widespread coronavirus stimulus. The reintroduction of its 20-year note and larger issuances across a range of maturities will shore up more cash to counter the government's surging deficit.

The Treasury will initially offer $20 billion worth of 20-year notes at a May 20 auction, according to a Wednesday release. Additional 20-year note auctions in June and July are anticipated, with each sale offering $17 billion of notes.

"Over the next quarter, Treasury's cash balance will likely remain elevated as Treasury seeks to maintain prudent liquidity in light of the size and relative uncertainty of COVID-19-related outflows," the department said.

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The department first announced it would reopen its 20-year note on January 16 to fund the government's trillion-dollar deficit. The US budget shortfall has since soared as legislators work to pad the economy from a coronavirus-fueled collapse. The Committee for a Responsible Federal Budget projected on April 13 the deficit will nearly quadruple to $3.8 trillion from $984 billion in 2020 alone.

The Treasury expects to shift its issuance concentration from notes to longer-dated bonds for upcoming sales to better fund mounting debt. Yields remain at historic lows as investors pile into safe havens amid the coronavirus pandemic and all-but-certain recession.

"In light of the substantial increase in borrowing needs, Treasury plans to increase its long-term issuance as a prudent means of managing its maturity profile and limiting potential future issuance volatility," the department said.

Auctions of 3- and 10-year Treasury notes and a sale of 30-year bonds will also take place in May, raising $42 billion, $32 billion, and $22 billion, respectively.

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