(Bloomberg) -- The U.S. Treasury trimmed its quarterly sale of longer-term debt for a second straight time, reflecting diminishing borrowing needs after a record ramp-up in debt to fund pandemic-relief spending.

The Treasury Department said in a statement Wednesday that it will sell $110 billion of long-term securities at auctions next week -- down $10 billion from November and in line with many dealers’ forecasts. It’s the first back-to-back reduction since 2015, after the unprecedented sizes of last year.

This month’s cutback could be the last for some time, some dealers say, with the Federal Reserve signaling it will be reducing its holdings of Treasuries -- forcing the department to sell more debt to the public. Fed Chair Jerome Powell said last month decisions on the bond portfolio are pending in upcoming policy meetings.

The Treasury in the meantime is trimming issuance of all of its nominal coupon-bearing securities -- those that pay interest -- by a total of $111 billion during the quarter through April versus the previous three months. And it’s not ruling out further reductions.

“While these changes will make substantial progress towards aligning auction sizes with intermediate-term borrowing needs, additional reductions may be necessary depending on developments in projected borrowing needs going forward,” the department said in a statement Wednesday.

Deepest Cutbacks

The deepest cutbacks will be for seven-year notes and 20-year bonds, while issuance of inflation-linked debt, known as TIPS, will see a slight uptick. That’s “given Treasury’s desire to stabilize the share of TIPS as a percent of total marketable debt outstanding,” the statement said.

Next week’s quarterly refunding auctions break down as follows:

  • $50 billion of three-year notes on Feb. 8, versus $52 billion in January and $56 billion in November
  • $37 billion of 10-year notes on Feb. 9, compared with $39 billion last quarter
  • $23 billion of 30-year bonds on Feb. 10, versus $25 billion in November
  • The refunding will raise $55.2 billion in new cash

The Treasury detailed overall cuts to nominal debt over coming months as follows:

  • Reduce sales of 2-, 3-year and 5-year note auctions by $2 billion per month over the next three months
  • Cut 7-year notes by $3 billion per month over the next three months
  • Decrease both the new and reopened 20-year bond auction sizes by $4 billion, starting in February
  • Reduce both the new and reopened 10-year note auction sizes by $2 billion, starting in February
  • Reduce both the new and reopened 30-year bond auction sizes by $2 billion, starting in February
  • Cut reopening sizes of floating rate note sales in February and March by $2 billion each, with the same reduction for the next new-issue two-year FRN in April

The Treasury’s new plans follow an increase in its estimate of federal borrowing needs for the three months through March -- though that was due to a smaller cash pile at the start of the quarter than it previously estimated.

Bill Sales

With regard to plans for bill issuance, the department said it’s “actively evaluating whether to change the 17-week” cash management bill to benchmark status, with an announcement pending at the next quarterly refunding, in May.

The Treasury Borrowing Advisory Committee, or TBAC -- a group comprising dealers, investors and other stakeholders -- has several times in the past advised that bills should amount to about a 15% to 20% range of the total debt pile is ideal.

TBAC advised the Treasury this month that it expects the Fed’s bond-portfolio runoff to trigger $1.6 trillion in new financing needs for the Treasury over the next three years. That prompts debate over future issuance plans, the panel said. “The scenarios that seem most appealing continue with the pace of cuts in the current quarter only but then either slow or stop the cuts thereafter.”

As for Treasury Inflation-Protected Securities, which compensate for increases in consumer prices, issuance plans are as follows:

  • 30-year TIPS new issue size maintained at $9 billion for February
  • 10-year TIPS reopening size maintained at $14 billion in March
  • 5-year TIPS new issue size boosted by $1 billion for April, to $20 billion

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