The median survey response forecast total net Treasury bill, note and bond issuance to be $388.0 billion in the fourth quarter of 2008, higher than the $178.4 billion issued in the third quarter and the $33.4 billion issued in the fourth quarter a year ago. The year-over-year projected increase is consistent with the higher budget deficit forecast for this fiscal year. The quarter-over-quarter projected increase in issuance volumes includes the effect of the recently passed Emergency Economic Stabilization Act (EESA) of 2008. The gross Treasury issuance forecast, which is forecasted to be lower than that in the third quarter, is affected by expected refundings of maturing and callable debt as well as Treasury’s new cash needs. However, the sharply higher net bill issuance projection incorporates the effect of higher demand for cash as the Treasury acts to stabilize the economy and adds liquidity to the credit markets. The higher deficit projection of $687.5 billion for FY’09 may reflect expectations of moderating tax revenue growth due to the prolonged economic downturn and the continuing need to correct credit market disruptions and add confidence to the financial markets. Benchmark yields are expected to fall by the end of the fourth quarter, and remain below the current level at the end of March 2009. In addition, the survey results project a steepening of the yield curve over the next few quarters as measured by the 2-year to 10-year Treasury yield spread.

About the Report

A quarterly survey of SIFMA’s Primary Dealers and Government Securities Research and Strategist Committees concerning U.S. government issuance and rates forecasts. The committees are composed of trading strategists and research analysts at SIFMA member firms who specialize in the U.S. government and agency securities markets. The survey is intended to provide market participants with the current consensus expectations and median forecasts of many of the primary dealers and other firms active in the U.S. government and agency securities markets.

Credits

SIFMA Capital Markets

• Staff Advisor: Rob Toomey

SIFMA Research

• Director, Research: Tiffany Coln