Tuesday, August 1, 2023

Interest Rates: " US Government Debt Spikes by $1.2 trillion since Debt Ceiling, to $32.7 Trillion. Treasury to Add $1.5 Trillion in Debt by Year-End"

From Wolf Street, July 31:

Stunning numbers out today. Investors will buy the securities, plus those the Fed steps away from. But… Crystal ball sees rising longer-term yields.

To set the scene for what’s to come in a moment: The total US national debt spiked by $1.19 trillion since the debt ceiling was lifted, to $32.66 trillion.

And to set the scene further: This $32.66 trillion of debt is composed of two groups of Treasury securities:

  • $6.9 trillion of nonmarketable (not traded in the market) Treasury securities that have been bought by US government pension funds, the Social Security Trust Fund, etc.;
  • $25.7 trillion in marketable securities (Treasury securities held and traded by the global public, from regular folks to central banks, including the Fed).

Marketable securities outstanding have spiked by $1.05 trillion since the debt ceiling was lifted on June 2, a huge amount of issuance in two months.

And in a moment, we’ll get into how much more will be issued for the remainder of the year: Another $1.5 trillion (as indicated by the green line and technical term for this phenomenon), according to the jacked-up projections released today by the Treasury Department:....

....Yield solves all demand problems. That’s what yield is for, and it’s a good thing, we know that. You can sell even the riskiest junk bonds if the yield is high enough. So there will be buyers, but the yields will have to be high enough to attract them.....


"Traders Brace for $102 Billion Wave of Treasury Bond Sales"
Following on the post immediately below, "JP Morgan on the 'stealth stimulus' supporting the US economy even after rapid rate hikes"....