Something curious happened with outstanding Treasury debt over the past few years: after plunging in average maturity to just 49 months during the Lehman crisis, when everyone scrambled to safety of Bills and the Treasury was forced to issue gobs of it, since then average maturity has been a one way street, and as of the end of Q1 as per the most recent quarterly refunding statement, is at 60 months. This is the "oldest" average Treasury age since 2003, and a substantial shift from the recent average of about 55 months. Incidentally, 60 months is what Stone McCarthy calculates is the average maturity of Fed SOMA holdings (as in debt purchased as part of the various QE programs). Keep in mind this chart is as of March 31: in the past three months due to the debt ceiling breach, Geithner has aggressively reduced Bill rollovers, which means the average Treasury age is likely about 65 months if not more. And while we have discussed the imminent surge of Bill issuance as soon as the debt ceiling is raised, this will be nowhere near enough to get the Treasury comfortable with average bond aging. Since Geithner will certainly do all in his power to reduce the average duration on marketable bonds to recent historic lows, the only way we can think of this happening on a "voluntary" basis is for a recreation of the same Lehman conditions that forced a 6 month change in maturity in the span of 60 days back in October 2008.
Parellel with this, we see the average maturity of Fed Treasury hodlings:
Another chart probably just as important, shows something far more important, and something we also discussed recently in "T-Minus Two Months Until The $500 Billion Rolling Debt Ticking Timebomb Goes Off" when we observed the massive amount of Bills maturing and needing to be rolled over in under two months. As can be seen on the chart below, the bulk of monthly issuance each and every month is primarily Bill focused. When the next quarterly refunding statement details the Q2 issuance we are confident that Bill issuance will plunge to historic lows on a relative basis. Which, once again, argues that the Treasury will do all in its power to not only create the Bill supply (that comes natural to them), but make sure there is more than enough Bill demand to soak up about $1 trillion in debt maturing in under one year over the next several months. What that event will be we can only speculate.
Source: US Treasury, we will post an update when the Q2 refunding summary is posted this Friday.