Bond Markets Are on Edge. Today’s Treasury Auction Announcement Might Not Calm Nerves.

There’s angst in the bond market. Traders are on tenterhooks waiting to see if the Treasury alters the size of its coupon issuance as higher costs and a rapidly growing deficit have caused U.S. borrowing to skyrocket.

The U.S. Department of the Treasury has historically practiced operating in a “regular and predictable manner” when it comes to auctioning its notes and bonds. The tone changed, though, in the third quarter’s “quarterly refunding” report, when it announced larger than expected borrowing through coupon sales to meet all obligations. Since the debt ceiling suspension, higher debt sales are replenishing Treasury cash balances, which had dropped to $37 billion in May from $447 billion at the year’s start.