Maturity Of Average Outstanding Treasury Debt Jumps To 8 Year High

Tyler Durden's picture

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.

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Thomas's picture

Makes sense to me. If they are going to splurge (spooge) on a debt purchase, they might as well buy the far end of the curve. Last chance. (Just kidding; I am sure they will be buying a lot more.)

BC6's picture

Looks as deep as all the new found rare earth metals

zorba THE GREEK's picture

 Extending the average maturity rate may be a sign of higher interest rates to come.

Central Bankster's picture

Maturing Treasuries are transitory?

Re-Discovery's picture

So end of QE says short treasuries, and this says go long.  What is an atuned ZH'er to do?

May be the 'flight to treasury' moment is a new 9-11 attack (as hinted in Italy's deadline for disclosing short positions?)

disabledvet's picture

it says watch out Western Europe and watch out Japan and I agree that the flight to treasury moment does represent a new 9/11 only this time with finance instead of bombs. the organizations and individuals engaged in said activity represent a clear and present danger not only to the European Union and to the actual individual nations that comprise it (and have for over a year now) but also in my view all Western governments in general including Japan. Our own media tapping our own phone lines (and all other forms of communication) is just the tip of the iceberg. We shall see if our "nine" has the courage and ability to make our world stand for some form of rule of law for without that we lose everything else. And of course that the perpetrators of these crimes be brought to justice in the same way we brought Osama Bin Laden to justice.

BlackholeDivestment's picture

...''maybe''??? try ...fer sure fer sure, we are in the Valley of decision now Bitchez.'s too perfect for it not to go down this way, which means there may be hope that it happens a bit later then say ...September 11, 2011, on the ten year timeline and the whole Elenin Sun thingy.

...but it sure looks freaky huh? all this global mark meltdown just happens to converge with great quakes ...massive waves ...huge object smacking into the Sun ...massive floods ...storms ...drought ..tornadoes ...and on and on??? Factor in prophecy and well, ''chance'' goes out the window.

Re-Discovery's picture

my point is the the powers that be will use this date as an excuse.  false flag to continue manipulation.   not that there is some cosmic connection.

Mactheknife's picture

Sooner or later they are going to have to run everbody out of stocks and into bonds as there are few other buyers left.

baby_BLYTHE's picture

Rep. Eric Cantor is short US treasuries

House Majority Leader Eric Cantor (R-VA) is personally invested in a fund that “aggressively ‘shorts’ long-term U.S. Treasury bonds, meaning that it performs well when U.S. debt is undesirable.” Cantor owns up to $15,000 in the fund, which is called the ProShares Trust Ultrashort 20+ Year Treasury ETF.

a debt 'deal' was never really their intent

Kreditanstalt's picture

Buyers of Treasury debt are not you and me.  They are institutions, banks, funds, your pension fund, your insurer, and maybe even your employer.  They are governments, multinationals, and financial firms.

None of them know the real value of money.  No one knows what real money - and real purchasing power - is anymore.  They'll never "spend" that money tied up in Treasuries.  It will be there forever, providing an increasingly meagre "yield", in increasingly worthless dollars.

They can't protect the purchasing power of their zillions of digits.  They dare not spend them, and their policyholders, clients, "investors" and beneficiaries haven't yet tried to withdraw these funds en masse.  But as conditions worsen, they will do so.

WE little guys can avoid this: opt out.  Save in gold.  Spend your dollars as soon as possible, on necessities, land, housing, energy, food and precious metals, commodities, household necessities. 

There is no such thing as "money" anymore.  There is only PURCHASING POWER.

Ricky Bobby's picture

+1 Much food for thought in your comment.

Amish Hacker's picture

I hope you're right about the money staying in Treasuries and never getting spent, Kreditanstalt. Because if any of that money decides to go elsewhere, the roll will be impossible. We have to soak up a trillion over the next several months? And increasingly more after that? I just can't see how that will be possible.

Kreditanstalt's picture

Very true...hadn't thought of that.  Moreover, with so much - so many billions of ersatz dollars tied up in bonds of all kinds, permanently rolled-over - is any of this even real money anymore?

I'm betting it sure will be if any significant amount of it ever enters circulation.  Continuing price inflation in North America could spur withdrawals of funds; so could continuing job losses and structural unemployment, inflation overseas or maybe even a hard Chinese landing...

BlackholeDivestment's picture

                    The Consumed Assumed Consumer

...yeah, had some checkout lady, or is it ''check'd-out lady?, spend a moment confirming the hundred dollar bill was real enough to maintain her job, lol. I informed her it was fake and represented a negative principle but, she still accepted the mark of the beast. LOL! ...for now.

DrunkenMonkey's picture

Interesting perspective but all the assets you refer to (except maybe food) are massively over-valued at the moment.

Atomizer's picture

I have a question. Generally I use $.40/dollar for debt obligations. What is the new formula? Your reply is kindly appreciated.

oogs66's picture

i think extending debt maturity is actually smartest thing they have done

Vint Slugs's picture

oogs, you may be right about extending, but you missed the gist of the article:  if you subscribe to the ubiquitous ZH conspiracy theory view, "they" will try to reduce the avg maturity via a "Lehman"-like event (which will be created instead of naturally occuring).

Tyler Durden's picture

It most certainly will occur naturally. The point is that it would have occurred long ago if $4.5 trillion in debt wasn't spent to prevent it from happening.As for the extension of the avg maturity, we absolutely agree that it is the smartest thing the Treasury has done... if one can call herding the cattle into whatever securities generate even the tiniest of return smart.

Anonymouse's picture

Agree it is the right thing for Treasury to do.  Perhaps not great for investors, but Treasury would be foolish not to extend given current rates and likely future rate increases (due to lack of demand and inflation, not so much from improving economy).  The decline in maturities that began under Clinton/Rubin (and a big part of the Clinton "balanced budgets") were always a source of risk (both rate and roll) and seemed foolish.  Any move in the other direction is a positive.

zorba THE GREEK's picture

 I believe the debt ceiling delay is intentional. Once it is raised, they will have to sell so many treasuries, soon followed by much roll-over sales. First, through using rating agencies to

 downgrade EU countries which helps bring EU to brink of meltdown, and by hyping collateral

 damages, enough fear is created to drive money into treasuries without having to raise rates.

 That way they don't have to drive equity markets down in U.S. to achieve same result.

 They know EU won't let any country default at this time, but methinks this is dangerous

 game because miscalculation could lead to calamity. 


Founders Keeper's picture

[First, through using rating agencies to downgrade EU countries which helps bring EU to brink of meltdown, and by hyping collateral damages, enough fear is created to drive money into treasuries...]---zorba THE GREEK

Hi zorba.

IMO, this would be an astute presumption IF there were no 3rd party risks in the US.

Thank you for your post.


Robslob's picture

All the money sent to the EU is ours so it coming back won't be enough. Sorry Charlie, they will have to take the market with it too...

johnnysize's picture

Makes sense. We need to sell as much long term debt as possible before destroying the dollar. Isnt this Econ 508?

buzzsaw99's picture

A very interesting situation. We can assume that the fed's voracious buying of the belly has done two things, spoon fed profits to favored PDs and also a pushing out of the avg, maturity of treasury debt. Now, with the supposed end of QE coinciding with the need to roll a bunch of bills at zirp there must be a great scare to induce the proper reaction. However, this all takes for granted that the reverse doesn't happen due to a default by and subsequent downgrade of the treserve. :munches popcorn:

landho69's picture

This is the Bennie B to Timmy G Hail Mary Pass.... The play works like this. Ben will hold off on QE3 as the market panics out of risk allowing Timmy to fund light years of long dated T's at sub 2.00% on 5's and 3.00% on 10's. Wouldn't be surprised if they launch a few tranches of 50 Year @ 4.50% to throw a bone to the pension crowd. 



zorba THE GREEK's picture

 3rd party risks to U.S. - Founders Keeper 

 They don't want default in EU, just appearance of possible default. They know EU can't let

 default happen. Even China and U.S. would step in to stop default. That's why I say this is

 very dangerous game U.S. is playing.