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While financial markets try to guess the pace at which the Federal Reserve will reduce its $120 billion a month in Treasury and mortgage-backed asset purchases, the Treasury Department looks to be on the verge of scaling back its quarterly sale of longer-term Treasury bonds for the first time in more than five years.

The reduction in Treasury bond sales is expected to begin with next week’s quarterly refunding auction. And, a number of Wall Street banks project, sales of regular coupon-bearing debt will be pared back by some $1 trillion by about the third quarter of 2022. By comparison Federal Reserve Chair Jerome Powell has said the central bank’s $80 billion-a-month in Treasuries purchases will be completely terminated by mid-2022.

While the Treasury’s exact borrowing needs will depend in part on two longer-term fiscal packages that Congress aims to enact in coming weeks, the U.S. budget deficit is now on a downward path, which makes last year’s record action sales to fund Pandemic relief unnecessary. —

The reduction in the size of Treasury auctions will largely offset lower demand from bond purchases by the Fed–which, all things being equal, would keep Treasury bond yields at recent levels. (The path of inflation is, of course, the wild card here.)

On Wednesday, just hours after the Fed’s policy announcement from the November 3 meeting of its Open Market committee, the Treasury will release details of the department’s November quarterly refunding sales of 3-, 10- and 30-year debt.

All this assumes that Congress–or actually Congressional Democrats–will raise the debt ceiling in early December. The Treasury Department has run down its reserves in order to avoid running out of cash while Congress dithers over raising the debt ceiling. Estimates say that it will take about $300 billion in net debt issuance in 2022 to restore the Treasury cash balance back to around $800 billion.