The US government will sell less debt than expected during the current quarter, the new borrowing estimate, released on Monday afternoon, indicated.

Treasury expects to borrow $740 billion in privately-held net marketable debt during the July to September period, down markedly from the projection that accompanied last quarter’s financing estimate. The downward revision — $106 billion — was attributable to a slower pace of balance sheet runoff at the Fed.

This was largely as-expected. The Fed hadn’t yet announced the parameters for the QT taper when Treasury released its preliminary estimate for this quarter’s borrowing needs in April. Dealers had plenty of time between the QT taper unveil and this week’s update from Treasury to do the math, which is to say a cut to the borrowing estimate was penciled in. It wasn’t a surprise. Treasury also said it had around $28 billion more on hand at the end of last month than it targeted in the April estimate.

Who cares? Well, that’s the thing: Fewer people now than during the last several QRA weeks. Recall that Treasury upset markets around this time last year, when concerns around higher borrowing, a shifting buyer base for US debt and an increasingly fractious Congress stoked a rather dramatic term premium repricing exacerbated by the Fitch downgrade and exploited by the likes of Bill Ackman and others who opportunistically piled on to short the long bond.

Fast forward to the November 1 QRA and Janet Yellen moved to stanch the bleeding by tipping smaller-than-expected coupon increases.

As the figure shows, the repricing promptly reversed. That reversal lower was part and parcel of the dramatic market inflection that kicked off the November-December “everything rally.”

Three months later, Yellen cut the borrowing estimate for the January through March quarter and indicated that coupon increases were over for the time being, thus ending the market’s obsession with Treasury’s quarterly refundings.

Generally speaking, Treasury supply worries and sponsorship jitters have faded, even as the questions and concerns which stoked the August 2023-October 2023 bond selloff remain unanswered and unaddressed. Treasurys have rallied for three straight months and as the chart below, from BMO’s US rates team shows, auction volatility has subsided.

“After peaking in 2023 at the highest levels in over a decade, auction volatility has declined in 2024,” the bank’s Ian Lyngen and Vail Hartman remarked, editorializing around this year’s supply reception. “From a general perspective, we anticipate coupon auctions will continue to benefit from the fact it appears that i) we are getting back on a disinflationary path, ii) the labor market is cooling and iii) the Fed is nearing an inflection point for policy rates,” they went on, adding that “the biggest risk to a further decline in auction volatility over the balance of the year is the potential for stimulative fiscal measures and the associated supply/reflation concerns.”

Another worry is the debt ceiling, which’ll be back to haunt markets around the turn of the year. Treasury said Monday it expects to have $700 billion on hand when the debt limit suspension expires on January 1, 2025. That’ll be the buffer standing between the US and a technical default, pending congressional action to raise the debt limit or suspend it again. Everyone with any sense about them favors doing away with the debt ceiling altogether and for good, given that it serves no purpose other than as a political cudgel.

The US came perilously close to a technical default in May of 2023, before then-House Speaker Kevin McCarthy decided that an asinine dispute over a completely imagined constraint on the US Treasury’s capacity to meet America’s previously-incurred financial obligations wasn’t worth blowing up the financial universe for. (Quite the pragmatist, that Kevin. They don’t make ’em like him anymore.)

Who knows how that debate will unfold five months from now. I doubt it’ll be cordial, particularly if the election’s still being litigated, either in the courts or on the steps of the Capitol again.