The Securities Industry and Financial Markets Association (SIFMA) forecasts that government securities issuance will rise in the fourth quarter.

In a survey released Friday forecasts that total net Treasury bill, note and bond issuance to be US$249.5 billion in the fourth quarter, up by approximately 7.5% from the net US$232.0 billion issued in the third quarter. It also expects the US Treasury to issue US$42.0 billion of Treasury Inflation-Protected Securities (TIPS) in the fourth quarter, which would be flat from the third quarter.

Participants in SIFMA’s forecast survey (comprised of trading strategists and research analysts who specialize in the U.S. government and agency securities markets) expect a median US$236.5 billion of Treasury coupon securities for the fourth quarter, 11.4% higher than the third quarter’s net issuance of US$212.4 billion. Gross coupon issuance is expected to total approximately US$535 billion, down 1.7% from the US$544.0 billion issued in the third quarter.

The survey also forecasts total gross coupon issuance by the four largest Federal agencies to increase to US$210.5 billion in the fourth quarter, which would represent a 17.9% increase from the third quarter, led by the Federal Home Loan Bank.
Benchmark two-year Treasury yields are forecast to increase to 0.29% in the first quarter of 2013, and five-year yields are expected to increase gradually to finish the quarter at 0.83%, with 10-year rates to rise to 1.83% at the end of March 2013, and the 30-year yields at 2.9%.

The survey also asked participants about risks to their forecasts. It says that the main risks on the upside are: better than expected economic data, improvement of the situation in Europe, and avoidance of the fiscal cliff. The survey respondents also expect that a victory by Republican challenger Mitt Romney in the presidential race, and a Republican-controlled Congress would cause the rates to increase.

The main risks noted on the downside are: worsening of the U.S. economy, escalation of the European crisis, realization of fears around the fiscal cliff, and greater than anticipated Fed purchases.