Research Team at Goldman Sachs, suggests that in the first week of this month, the US Treasury announced significant cuts to Treasury coupon issuance. Key Quotes “The cuts are set to make headroom for a significant ramp up in Treasury bill issuance to meet expected increases in demand. The US Treasury further suggested that additional coupon cuts may be in the offing. An impending wave of reinvestments from the Fed’s Treasury holdings make coupon cuts more feasible. In 2016 alone, more than $200 billion of Treasury securities held by the Fed are set to mature, incrementally reducing Treasury’s need to raise funding from the public. The outlook for public Treasury issuance remains highly dependent upon the outlook for reinvestments from the Fed’s portfolio—known as the System Open Market Account (SOMA). Although we see some scope for additional reductions in coupon securities this year, issuance will likely have to ramp back up quickly in the second half of 2017 as SOMA reinvestments end and the budget deficit grows. Recent communications from Fed officials suggests that the size of SOMA is unlikely to decline in the near term. We expect the Fed will start tapering reinvestments around Q3-2017, although risks are skewed towards a later start to portfolio runoff. Separately, we are revising down our forecast for Q1 GDP growth to +1.75% (quarter-over-quarter, annualized) from +2.25% previously. We now see weaker business fixed investment and a larger drag from inventories.” For more information, read our latest forex news.