Unlike last year, when the issuance of government bonds was absorbed by central banks keeping a lid on yields, 2022 will be the opposite.
There will be less central bank buying. The Fed will likely let the maturities and coupons on their existing holdings roll off and not reinvest them.
Consider that the US and Australian governments have considerable bond financing requirements. In the first half of 2022, the Australian bond issuance task is around $60 billion, with the RBA take-up likely to be $24 billion at most. If the Fed begins winding down its balance sheet after just two hikes by September, the market might need to absorb an additional $US150 billion of net Treasury issuance in the last quarter of 2022.
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