Treasury Expects To Hit Debt Ceiling By End Of May, Discloses Plans For "Century" Bonds

Tyler Durden's picture

As part of its quarterly refunding statement issued earlier, the Treasury announced that it now expected to breach the debt ceiling "sometime between April 5, 2011 and May 31, 2011.  The modest change in
these estimated dates reflects an upward revision to projected receipts
and a projected downward revision to debt to be issued to government
trust funds." The tentative breach point has been pushed back by one week compared to the previous estimate of March 31, 2011 to May 16, 2011. Of course, these numbers incorporate the benefits of the wind down of the SFP program, discussed extensively previously on Zero Hedge, which we believe will provide a major (as in $195 billion over two months) liquidity boost for risk assets. As a reminder, as there was no 56 Day Cash Management Bill rolling auction today now that the Treasury is unwinding the SFP, tomorrow the market will see $25 billion in extra liquidity as an 8 week old bill matures and the proceeds are used by the PD to invest as they see fit. Back to the debt limit: when asked how much bigger the new debt ceiling should be, the Treasury left the ball in Congress' court:"We do not have a have particular figure that we
have put to Congress. That is their prerogative to offer that," Mary
Miller, Treasury assistant secretary for financial markets, told a news
conference. While not new, Reuters summarizes what will happen should Congress not succeed to raise the debt target number fairly well: "
If Congress does not raise the limit in a timely
way, the government could be forced to scale back operations. A failure
to lift the limit could raise the specter of a first-ever U.S. debt
default and push up interest rates sharply." According to Zero Hedge estimates, Congress will end up raising the debt ceiling to $15.9 trillion from the current $14.3... a number which will need to be raised once again in January of 2012, at which point the entire debt "ceiling" farce can just be put aside.

From Reuters:

A number of Republican lawmakers have raised opposition to increasing the limit without significant concessions on spending cuts from the Obama administration. A contentious debate is expected after the White House unveils its proposed fiscal 2012 budget later this month.

"Given the history of debt limit fights, brinkmanship will rule the day, and nothing of significance will happen in February," said Pierpont Securities analyst Stephen Stanley adding that a resolution could drag out "to the bitter end."

Senate Budget Committee Chairman Kent Conrad said the delay in hitting the debt limit buys more time for Congress to reach consensus on a plan to control long-term deficits -- a complex and difficult task.

"The increase in the debt limit, the amount of it, is much less important to me than having a plan that over time brings down this debt," Conrad, a Democrat from North Dakota, told reporters. "That to me is the key."

Treasury's Miller said the government had no plans to selectively cut or delay payments to employees or contractors . That "would in a sense be defaulting on our obligations, so it's not a path that we want to go down," she said.

Once again, none of this is new to Zero Hedge readers. What is, however, is the following:

The Treasury also disclosed that it had discussed
with big bond dealers the possibility of an "ultra-long" bond with a
maturity of 40, 50, or 100 years, as one of several options to broaden
the investor base for Treasury debt. Miller said no decisions on this
front were imminent.

While it is well-known, and much commented on here previously, that the US Treasury is funded with a woefully high ratio of short-term debt, the last thing the globally duration mismatched balance sheet needs now is to extended liability duration by orders of magnitude. Which is precisely why we are convinced that within 3 months the US Treasury will start issuing 100 year maturities... around the time when cotton surges by 10% each and every day.

For those who wish to learn more, the full minutes of the Treasury meeting can be found here.

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Gubbmint Cheese's picture

so buy a bond and a parrot and see which one gets called in first..



centerline's picture

At least you could eat the parrot.

Misean's picture

You could teach the parrot to say "Buy the f**king dip!" "Green Shoots!" "It's all contained!" "You can't eat gold!".

Bonds can't do that.

Confused's picture

Excellent! Thanks for the laugh. 

jus_lite_reading's picture

I've managed to keep my vulgar language contained and off the internet for the most part, but after reading TD's ZH, I have to say to the idea of perpetual bonds- FUCK THIS!


slow_roast's picture

Early Christmas gifts bitchez.

TheGreatPonzi's picture

"The Treasury also disclosed that it had discussed with big bond dealers the possibility of an "ultra-long" bond with a maturity of 40, 50, or 100 years"

RobotTrader was right. Don't fight the PigMen. But who will be dumb enough to lend money at 100 years, still?

redpill's picture

The term doesn't matter much when the Fed buys them back the next week

Dr. Gonzo's picture

If I bought one I could cash it when I'm a 139 years old. Something to look forward too for my old age fund.

malikai's picture

So lets see here. $1000 bill at 2.5% for 100 years.. That's a whole $137.60 in interest for the duration. I don't see what the problem here is. That sounds like a fantastic deal. Who wouldn't want that?!

jkruffin's picture

Easy answer, the taxpayer....and also they will force every single 401k/IRA plan into this scam like they planned all along.  Remember the open comment period they had last year regarding this Geithner swindle?

DaveyJones's picture

century bonds, by the time you count to a hundred...

lunaticfringe's picture

My math sucks. I had us hitting the debt ceiling at the end of the month. Deferring here and trying to sort out the pieces from this read.

tekhneek's picture

How were you calculating it? I was off too.

The numbers perhaps, or a link?

Comrade de Chaos's picture

Century bonds?!?

All right !!!, why enslave only one future generation, when you can enslave a few or more. 

And one would think given the spread of riots "someone" would take a notice. 

Uncertainty, must be "good" for the business.. coming to the theater near you. 

SilverIsKing's picture

Why stop at Century?  How about Millenium Bonds for those of us who eat right and exercise daily?

Wynn's picture

Which sacrificial lambs will be offered to the bond gods to get this deal done?

Guy Fawkes Mulder's picture

Step 1: Force, bribe, and-or trick the politicians into not raising the debt ceiling.

Step 2: The Ultimate Dollar Crisis and Ultimate Banking Crisis in world history occur.

Step 3: The media and experts start talking about how only a bank of the world that everyone in the world has to pay interest and debt to can possibly bailout the world economy and fight the Greatest Depression. BIS and IMF are considered to be the new "Fed" that are capable to save the world economy by being the ones to issue its debt.

Step 4: Meet the new boss... Your plan for the old New World Order is back on the fast track, having been stalled a bit over the past two years.

Step 5: Answer CAPTCHA question: "38 plus ___ equals 38".

Max Hunter's picture

I wonder who will own this only world bank.. I'll bet not one owner will be Jewish..

Misean's picture

Century bonds?!?!?! They need big biger biggerest thinking. A thousand year Reich...erm...Dumbocracy of pr0n freedom and football needs millenial bonds!

WestVillageIdiot's picture

This reminds me a lot of all of the stories of octegenarians taking out 30-year mortgages to buy houses.  Good luck collecting from a dead man.


Embalm this, bitchez.

jus_lite_reading's picture

Century Bonds are Perpetual Bonds. When a nation resorts to that, it's unofficially declaring insolvency.

A Man without Qualities's picture

The UK government issued perpetual bonds in 1917, paying a 3.5% coupon.  The amount borrowed was £1.9 billion, which was a hell of a lot back them, but they are still going strong.  In some ways, you are right, the UK was on the brink of insolvency back in 1917....

jus_lite_reading's picture

It's a running joke that a century bond is one that is the bond of last resort. It means an empire has run out of options to sustain the house of cards. There is a reason for that.

I'm sure that the Fed's bean counters have concluded that there is a very high probability the end of the world will occur within the next few decades. Either way, those bond holders will never be paid back.


Dr. Porkchop's picture

If they never fail to raise the debt ceiling, it means there effectively is no ceiling. What a fucking joke.

WestVillageIdiot's picture

They don't even offer up a budget.  Why the freak do they need to pretend that there is a debt ceiling?  I expect this little dog and pony show to be put to rest in the next few years.  It will be for our own good. 

At the moment the bullet entered Winston's brain he learned to love Big Brother. 

tmosley's picture

I'm surprised people trust these guys with even an attosecond bond, much less a femptosecond bond.


WestVillageIdiot's picture

You are right tmosley.  These same people I wouldn't trust minding my goldfish for a weekend but here they are responsible for a country with a $14 trillion GDP (supposedly) and the largest nuclear weapons arsenal on the planet.

I'm glad I didn't pick today to quit sniffing glue.

6 String's picture

If, as Goldman believes, congress waffles, how do the PM's respond? This is a pivotal time that will go down in American history books....if anyone is left to write about it.



Zedge Hero's picture

   How far can they kick this can down the damn road?  Instead of kicking it they want to pick it up and throw it.  "Give me a 250 year bond please sir, I want to invest in my great great great great great great granchildren's future, for they will surely be FUCKED!!"

countryboy42's picture

"That will be $45mil. Please drive to the first window."

Zedge Hero's picture

" Can I have some Unfunded Liabilities on the side with that too please?"

tekhneek's picture

"No, but if you purchase five-500 year bonds you get a 1,000 year bond ABSOLUTELY FREE!"

(with nominal inheritance taxes, of course.)

Misean's picture

By that time the scrap value of the bond certificate itself will be worth more than the redemtion amount.

tekhneek's picture

At the rate cotton's going it almost makes sense to accumulate, compress and store the raw materials then exchange them for PM's later.

Bob's picture

Century bonds are crazy genius.  Soak up liquidity with further fraudulant balance sheet support to allow continuing bonuses.  Them white shoe boyz is good.  As criminals at least.

Extend and pretend like donkey kong.

Dr. Porkchop's picture

I know.

I'm telling ya, the supposed real crooks, the mafia, can only sit in awe and wonder at what the banksters get away with.

Bob's picture

That's what Lucky Luciano grieved after spending time at the NYSE: "I picked the wrong mob." 

koaj's picture

why dont we just go Iceland on these fuckers and start over? 2 years of pain vs 100 years of debt slavery. i'll take the 2

Trader Joe's picture


Just issue prepetual callable bonds in both floating and fixed rate flavors

In fact, if I remember some of my ENRON accounting studies, because it would not have a maturity date, it would then qualify as equity, and thus would be a nice way to get around the debt ceiling



Dr. Gonzo's picture

Who would buy this shit?  

jus_lite_reading's picture

Perhaps the purple octopus looking aliens NASA is searching for so desparately... "Bring cash, and lots of it," is the signal they have been sending to outer space. Thus the reason we've had no response. Muthafuckers.


A_MacLaren's picture

Primary Dealers.

Question is who are they gonna flip 'em off to.

PD: Hello Ben? ...  Yeah, Timmah foisted some shit on us.  Send over your garbage truck.

Ben: You have to hold it a week so we can repeat the lie to the Chinese that we're not monetizing the debt.

PD:  &$#!*@  I gotta hold 'em a week?  These things are even stinkier than those 2007 Neg-Am ARMs and NINJA mortgages!

JasperNewtonDaniel's picture

The desperation is setting in.  What would your price a 100 year bond at for a country that has the largest debt and deficit in the history of humanity and a Central Bank that can inject figures into the money supply larger than the number of atoms in the universe?  Anything above ZERO would clearly be overpriced.


jus_lite_reading's picture

One can only imagine the yield on that