Research

Debt management decisions have macroeconomic effects comparable to monetary policy. Using high-frequency movements in interest rate futures around U.S. Treasury issuance announcements, we identify a Treasury policy shock—an unanticipated change in public debt supply across maturities. A shock that raises the five-year Treasury yield transmits strongly to corporate borrowing rates, tightens credit conditions, and lowers industrial production significantly. These effects closely mirror those of a conventional monetary policy tightening. The only distinction lies in the yield curve response: while long-term treasury yields increase significantly, the shock has minimal effects on short-term interest rates. We show that this pattern reflects the Federal Reserve’s sterilization of short-term Treasury issuance, while issuance at longer maturities is only partially offset.