Both Goldman and Amherst Pierpont expect instead that the department will rein back bill supply, since securities rolling off the Fed’s balance sheet will be added to the Treasury’s sales.

NatWest’s Gwinn sees a possible indirect impact on debt issuance. He says the decline in rates on securities the Fed targets will in time feed into the Treasury’s models, which would identify those points on the curve as the cheapest to issue.

“So I think it does affect the Treasury, but I think the Treasury tries to avoid a direct response,” he said.

The Treasury avoided explicit coordination with the Fed even during post-crisis quantitative easing. Mnuchin reaffirmed the separation of their roles to reporters this month, saying “our issuance strategy is completely independent” of the Fed’s response to the turmoil in funding markets.

One-Way Deficit
While Wall Street says the Treasury’s stepped-up issuance a year ago leaves it covered for the coming quarters, many dealers expect a widening funding gap toward the end of 2020. The federal deficit is likely to end this fiscal year above $1 trillion, according to the Congressional Budget Office, having narrowly missed that mark in the one just ended. And the shortfall isn’t about to shrink, judging by the apparent lack of appetite for fiscal restraint on either side of the political aisle.

“The deficit hawks have left the Capitol,” said Mark Spindel, chief executive officer of money manager Potomac River Capital.

Deutsche Bank sees coupon sizes rising again heading into 2021, by around $250 billion. Strategist Steven Zeng says this may be an opportune time for a relaunch of the 20-year bond, or a new issue linked to the Secured Overnight Financing Rate. TD expects the latter in roughly mid-2020, followed by a 20-year around the end of that year. Dealers consider that maturity more viable than the Treasury’s proposal for a 50- or 100-year bond, though Barclays and Jefferies are among those saying it could reappear Wednesday, driving the yield curve steeper.

A SOFR-linked issue and a 20-year security topped the list of blue-sky ideas the Treasury solicited from its borrowing advisory committee early this year to help expand and diversify the investor base for its expanding pile of debt.

So far, that expansion hasn’t hurt taxpayers in terms of raising the nation’s borrowing costs. Investors have proven willing to buy positive-yielding debt in the world’s most-liquid bond market, and fears of recession have only spurred that demand.

But if unintended consequences are emerging in the financial system’s plumbing, the Fed’s actions may have a bigger influence on refundings down the road.