Selected remarks from US Treasury Secretary Yellen's prepared speech to the US Senate banking

The US Treasury will release its quarterly financing estimates at 3 pm ahead of Wednesday's quarterly refunding announcement. In this edition, the Treasury will announce how much it will need to borrow in the quarter ahead with estimates for further down the line. On Wednesday, it will announce where on the curve it will borrow from.

Initial estimates of Q1 borrowing were $816 billion so anything less than that could see bids in the long end. My guess is that due to stronger growth, we will see higher tax receipt estimates and at least a few bill lion shaved off that. However Treasury yields are already down today so the market may have front-run that thinking.

The October quarterly refunding announcement is widely seen as having ended the Treasury rout and turning the entire market. That's when the US decided to lean more on bills and less on 30s.

Here's BMO's thoughts on where on the curve Yellen will tap on Wednesday:

"We’re of the mind the greatest uncertainty among market participants is whether Yellen chooses to continue boosting 30-year auction sizes or leans more heavily on the front-end to fund the deficit. The relatively smaller increases to 30- year auction sizes at the November refunding was certainly an acknowledgement to the rise in term premium which made it less attractive to borrow further out the curve. Then it was the 5.1 bp tail at November’s 30-year new issue that ignited worries around whether there was sufficient ongoing demand to continue upping auction sizes. Now, with term premium roughly 50 bp lower than it was in late October (using the Fed's ACM model), and the last two 30-year reopenings showing solid appetite for increased 30-year issuance, we think there’s good reason to believe Yellen will continue increasing long bond supply in the coming quarter. Our outlook for the size of coupon auction size increases mirrors that which was seen in Q4; with 2s and 5s increasing by $3 bn/month, while 3s grow by $2 bn/ month and 7s by $1 bn/month. In the long end, we anticipate 10s will see the largest boost at $2 bn/quarter with 30s more modest at $1 bn/quarter and 20s unchanged."