The Fed add ons have no impact on the auctions themselves. Treasury figures out how may to offer to the public, the auction happens/prices and the Fed adds on whatever they are going to reinvest getting the same price as what was set at auction.
More Fed add ons do affect things like the WAM of the total marketable treasury debt outstanding, so if the Fed added on alot to high duration auctions like 10/20/30s it would eventually pull the the WAM higher. A higher WAM for the Treasury outstanding debt was actually cited in the Nov QRA as a justifying reason for why it was ok to run with bills higher than the conventional 15-20% range, so if anything. More Fed Add Ons in higher duration auctions give runway for more bills. That said, I dont think it affects Treausuries reasoning for issuance composition much at all.
Does the need for fed add ons give more comfort to treasury to increase coupon issuances in next QRA?
The Fed add ons have no impact on the auctions themselves. Treasury figures out how may to offer to the public, the auction happens/prices and the Fed adds on whatever they are going to reinvest getting the same price as what was set at auction.
More Fed add ons do affect things like the WAM of the total marketable treasury debt outstanding, so if the Fed added on alot to high duration auctions like 10/20/30s it would eventually pull the the WAM higher. A higher WAM for the Treasury outstanding debt was actually cited in the Nov QRA as a justifying reason for why it was ok to run with bills higher than the conventional 15-20% range, so if anything. More Fed Add Ons in higher duration auctions give runway for more bills. That said, I dont think it affects Treausuries reasoning for issuance composition much at all.
If MMF use of RRPs falls by $200 billion as it’s been doing, bank reserves will go up again in January.
And let’s not forget the Fed’s other dual agency problem; conflict of interests And interest rates :)