UPDATE 1 -US Treasury keeps auction sizes unchanged, raises overall debt buybacks

By Gertrude Chavez-Dreyfuss

NEW YORK, July 30 (Reuters) - The U.S. Treasury Department said on Wednesday it does not anticipate increasing auction sizes for notes and bonds for at least the next several quarters, in line with market expectations, as it announced a $125 billion refunding from August to October 2025.

It will, however, continue to make incremental increases to the size of Treasury Inflation-Protected Securities (TIPS) and T-bill auctions.

In a statement, department will further sell $58 billion in U.S. three-year notes, $42 billion in 10-year notes, and $25 billion in 30-year bonds next week. These were the same auction sizes for the same securities announced at the July refunding.

The Treasury also announced it will double the frequency of long-end nominal buybacks and increase the size of cash management buybacks, all aimed at improving liquidity in the market. The changes to the buybacks will take effect on August 13.

"The Treasury will be focusing more on bill supply and they are trying to help market liquidity by increasing the sizes and frequency of buybacks, especially in the long end of the curve," said Gennadiy Goldberg, head of U.S. rates strategy, at TD Securities in New York. "So net net, this should be slightly positive for the long end."

Long-dated Treasuries briefly rallied after the refunding announcement, pushing their yields lower. But their yields were last higher on the day as the initial impact from the refunding was muddied by the strong U.S. gross domestic product number.

U.S. 10-year yields were last up 4.4 basis points at 4.372% US10YT=RR.

The Treasury announced that it's increasing the frequency of liquidity support buybacks in both the 10- to 20-year and 20- to 30-year nominal buckets to four times per quarter from two currently. But it will keep the current $2 billion maximum purchase per operation in both sectors.

With respect to the other nominal coupon pairs, the department will continue to conduct one liquidity support operation per quarter for up to $4 billion.

All told, the changes will lift total size of liquidity support buybacks from a maximum par amount of $30 billion per quarter to $38 billion per quarter.

"The Treasury is also increasing the size of cash management buybacks from a maximum amount of $120 billion per year to $150 billion. For this quarter, however, it does not expect conducting cash management buybacks around the September tax date due to the ongoing rebuilding of the Treasury's cash balance.

Cash management buybacks will resume in December, the Treasury said.

Overall, the Treasury's financing plan will refund about $89.8 billion of privately-held Treasury notes and bonds maturing on August 15 and raise new cash of $35.2 billion from private investors.