The Securities Industry and Financial Markets Association’s latest quarterly survey predicts that U.S. Treasury issuance will increase in the third quarter as the economic recovery stumbles.

The latest quarterly forecast from SIFMA finds the median forecast for total net Treasury bill, note and bond issuance for the third quarter rising to $399.0 billion (U.S. dollars) from the $343.6 billion issued in the second quarter, and up slightly from the $392.5 billion issued in the third quarter a year ago.

“The quarterly projected increase may reflect increasing worries regarding stagnant unemployment, a cooling economic recovery, deflationary pressures and the potential need for additional stimulatory measures by the U.S.,” it says.

Additionally, SIFMA reports that the median forecast projects the 30-year bond yield to be 4.2% at the end of the third quarter and 4.4% at the end of the fourth quarter. The 2-year Treasury note is forecast to yield 0.7% in the third quarter and 0.9% in the fourth quarter.

The forecasts reflect the responses to a survey of members of the SIFMA’s Government Securities Research and Strategist Committee, which is composed of trading strategists and research analysts at firms that specialize in U.S. government and agency securities markets.

“The upside risks survey respondents gave to the forecast include strong growth with markets not digesting supply, a greater than expected economic recovery, increased concerns about the budget deficit, and upside risks stemming from improvement in inflation data. The dominant downside risks to the forecast are the chance for a double-dip recession, economic problems in Europe, and lower than expected economic growth,” it says.

IE