Janet Yellen surprised markets earlier this week when Treasury cut its borrowing estimate for the current quarter. There were few surprises on offer in the details released on Wednesday.

That’s probably just as well. The undershoot on the aggregate financing projection was enough to bolster sentiment by itself, and pretty much ensured the refunding wouldn’t be an impediment to additional gains for equities in the event this week’s bevy of crucial macro inputs continued to argue for a soft landing, the Fed didn’t push back too hard against rate-cut pricing and mega-cap earnings didn’t disappoint.

Generally speaking, you don’t want the quarterly refunding announcement to be an event risk (bearish or bullish) let alone the event risk on a calendar full of them. So, the combination of a lower-than-expected financing estimate and an as-expected refunding was a good balance, and although reception will remain topical (i.e., traders will continue to eye the auctions closely), everyday investors should get some respite from the supply obsession now that we’re on the other side of this.

Treasury will increase auction sizes for twos and fives by $3 billion per month, threes by $2 billion and the seven-year by $1 billion. 10- and 30-year new issue and reopening sizes will increase by $2 billion and $1 billion, respectively. There was no change to the eccentric 20-year.

That was all in line with consensus. Almost exactly. The guidance suggested we’re seeing the end of the size increases. “These cumulative changes will leave Treasury well positioned to address potential changes to the fiscal outlook and to the pace and duration of future SOMA redemptions,” the announcement said. “Based on current projected borrowing needs, Treasury does not anticipate needing to make any further increases in nominal coupon or FRN auction sizes, beyond those being announced today, for at least the next several quarters.”

That was expected, but it’s important: In addition to now being on the other side of this refunding, we’re in the proverbial clear on the supply increases which, readers will recall, caused all sorts of problems beginning in August.

On bills, the lower financing estimate meant auction sizes would start to decrease in a few months, so we already knew that. Bill sales will run at current levels into late-March, increasing privately-held supply by between $300-350 billion on net over the next two months, Treasury said Wednesday, adding that “by late-March or early-April,” short-dated bill auction sizes will see “modest” cuts headed into tax season.

The color on money market funds and bill demand from the TBAC minutes was worth a quick mention. Here’s the relevant passage:

Dealers broadly expected that the FOMC will reduce policy rates during 2024; there was likewise a broad consensus among dealers that the Federal Reserve would reduce the pace of SOMA redemptions in the coming year. Dealers noted that, all else being equal, lower SOMA redemptions would reduce Treasury’s net privately-held borrowing needs. As such, dealers anticipated this would likely result in fewer Treasury bills being issued to private market participants, given the role of bills as Treasury’s issuance “shock absorber.” By contrast, dealers cautioned that lower short-term interest rates may present headwinds for Treasury bill demand during 2024 by reducing the relative attractiveness of money market funds and short-term investments.

MMFs were a veritable sponge (through RRP transformation) for the deluge of bill issuance post-debt ceiling deal. Now, the RRP liquidity cushion is down to $577 billion, and as the minutes noted, it’s unclear what happens to MMF flows in the event rates start to look incrementally less attractive. Relatedly, it’s unlcear what happens to MMF bill demand in the event the RRP facility rate begins to look more attractive amid rate-cut speculation. (See here for more on that dynamic.)

Anyway, the TBAC minutes went on to note that dealers “expressed confidence that money market funds would not face significant outflows and would continue to be a meaningful investor in both Treasury bills and Treasury repurchase agreements throughout 2024.”

Finally, Treasury intends to test out buybacks starting in April. They’ll let you know how it goes in May, at the next refunding.