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Treasury Hopes To Auction Off $99 Billion In Bonds Next Week... But Can It?
Earlier today, the Treasury announced its auction schedule for next week consisting of $99 billion in new bond issuance (2 Year, 5 Year, and 7 Year). There may be a slight problem with that actually being legally allowed. Here's why...
As we reported previously, the total US debt is now well above the debt ceiling. Since then the total debt number has only grown and as of yesterday was $14,320,468,555,091.68. Luckily, the legal loophole, the debt subject to the ceiling is still marginally below the $14.294 trillion cap: it was $14.268 trillion, or just $26 billion less.
So here is the math that is just a little troubling:
According to Treasury direct over the next week there will be a rather substantial net cash pay down:
- April 21: $92 billion in Bill Issuance offset by $122 billion in maturities for $30 billion in net debt reduction
- April 29: $14 billion in $14 billion TIPS issuance settles (auction today): $14 billion in net debt increase
- May 2: $99 billion of the abovementioned bonds settle (auctions next week), offset by $52.6 billion in maturities: $46.4 billion in net debt increase.
Visualizing this from Treasury Direct:
This means that over the next week there will be a total of $30.4 billion in net debt increase.
Backing up, as noted above there is $26 billion in capacity under the cap.
So..... just how does the Treasury plan to offset the $4 billion breach of the legal debt ceiling that is projected to appear on the Treasury statement as of May 2?
We don't have an answer. We hope Sec. Geithner does.
And in other news, courtesy of the April 27 FOMC meeting, the next 5 year auction will close not at its usual time of 1:00pm but at 11:30am (with non-competitives deadline at 11:00 am). At least it explains the absence of POMO on that day.
From the special announcement:
In view of the upcoming FOMC statement scheduled to be released around 12:30 p.m. on April 27, 2011, the noncompetitive and competitive closing times for the 5-year note auction to be held on April 27, 2011, will be 11:00 a.m. and 11:30 a.m. ET, respectively.
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The game will play until
(1) Oil becomes too expensive (>115 WTI)
(2) China thinks the negatives of immobilizing capital in US debt at a very low yield (already a negative real rate) outweigh the benefits (the US don't collapse, so they continue to export)
The first is likely to happen before the second.
Anything else? It's noise.
Either of the two brings WWIII and Mad Max... get the party started now
All this changed when the currency pegs came off and the US needed to devalue its dollar. It no longer matters what the value of a currency is, what matters is that China can create an unlimited quantity of it and buy US Bonds and if the Yuan value plumets, so what, it's good for exports. Even a 99% USD loss on something purchased with yuan created for free is a result...
Despite the rhetoric, China couldn't give a stuff about it's US dollar bonds...
There is an enormous difference between "created out of thin air" and "created for free".
Don't ignore the tremendous societal and economic costs of this giant theft. The dollars that flow into China are not gifts; they are payment for vast aggregates of low-paid Chinese toil. When the PBOC "sterilizes" dollar inflows with RMB creation, they expand local money stock, thus rampant price inflation.
The Chinese worker gets ripped off twice: First, he gets 40 cents per hour, or $24 for a 60-hour week. The State Administration for Foreign Exchange steals part of the value of his labor (like the plantation owner stole the value of the field workers' labor) through the export pricing structure. Then Wang Chung goes to the store and gets ripped again with 20% price inflation.
It tends to make people mad.
There is no difference between the two in the context that I and others normally refer to money creation. We all know, or should know the impact of money creation for little people, which is what you refer to, but that is not the same for CB's that can create money from thin air and for free, and may need to do so to maintain relative currency exchange rates.
Anyone with any understanding of economics will know that there is no such thing as free money in the real world, your comment though genuine and correct is not the point I am making...
My point is that if I can create money for free and I create 1 billion renminbi for example, if that investment becomes worth say even 1 million of US real estate (and not currency) then that was a good deal and is all the incentive CB's need to create an unlimited supply of new money and especially if a lower exchange rate is possible or even desirable.
paulson's 3 page 'plan' gave the fed/treasury/congress the power to do whatever they want whenever without regard to 'the laws'.....
No they can't it would be illegal, congress would/should go ape.
congress has been neutered. Obama and his Czars control US.
Correction - the Czars and their tool Obama control the world economy but cant get a handle on the price of Silver.
here is an interesting rant from trader Phil
Deficit Drop Off
Phil Flynn of PFGBEST - InsideFutures.com - Tue Apr 19, 8:43AM CDT
The Energy Report for April 19, 2011
In school we were taught that the US was the bedrock of the global economy and our triple credit rating was almost a foregone conclusion. US bonds were the safest investment in the world and the chance of a default was unthinkable. Of course with our politics in Washington, we now know that we are living in a fool’s paradise and what should be abundantly clear is that we can’t continue to have our cake and eat it too.
Call it a deficit drop off! Oil prices dropped dramatically after the S&P downgraded the US debt outlook from stable to negative. Precious metals saw extreme volatility as traders were not quite sure whether to take this news as bullish or bearish. Normally if the US debt rating is lowered the value of interest-rates will have go higher to attract investors to buy our out of control debt. In that case, the value of the dollar would go higher. Yet higher rates could slow economic growth thereby creating a double whammy for energy prices. Lower demand and a higher dollar would mean lower prices. Normally that would be bearish for precious metal yet the threat of a downgrade for the US could shake confidence in the entire structure of the global economic system, creating a desire to get rid of worthless government paper and get into hard assets like gold, silver and even Black Gold, our precious crude oil.
Now the question is whether Washington will finally wake up to the very real threat that stands to shake the confidence in the greatness of the Untied States of America. Our politicians live in a fool’s paradise just like the fools that are saying that evil speculators are driving up the cost of oil. Why can’t these people acknowledge the risks that are right in front of them? Why can’t they see that the US debt and the steps to keep our economy afloat is a major factor driving commodities? The Untied States of America is running a dangerous deficit printing money like it is going out of style and we are now at the highest risk of default in many years and people wonder why they have to pay four dollars of US paper to buy a gallon of gas! Is it any wonder why open interest is running to commodities? It is because the fundamentals demand it! Interest rates in the US are below zero forcing money into commodities!
Wake Up! It is time to grasp the truly historic macroeconomic events that are playing out before our very eyes and realize that by printing money to pay off debt has a real cost to everyone in this country. It impacts the cost of oil. It shakes confidence in the purchasing power of the dollar. It shakes confidence to the global economic infrastructure and makes commodities inherently more valuable. I am tired of the growing attacks on the free markets and freedoms in general as people want to live in a world of denial. The US is in big trouble if they don’t get their budget under control. Oil is more expensive because the US has been printing money to prop up its incredible amount of debt. I am tired of Washington blaming Wall Street or capitalism or speculators for the global economic problem when the problem is mainly created in Washington by those same politicians. They can’t keep spending money the US doesn’t have. You can’t keep printing money to pay of your gluttonous spending. You can’t keep strangling economic growth by taxing the heck out of the most productive parts out of our economy and continue to expect that we can provide the type of growth it will take to get the economy out of its current fiscal situation. Wake Up!
I am tired of analysts with such a narrow view of fundamentals who can’t acknowledge that the market is right and they are wrong. The market is acknowledging the impact of the US debt situation as well as the geo-political threat to oil which is at the highest level since the Arab oil embargo. Ever since I have been in the futures business I have heard people blame speculators for the price increases in oil, yet looking back over the last 25 years you can see a solid fundamental reason for the price moves. In fact I have been telling people since the year 2000 that explosive economic growth in China and OPEC manipulation has been driving the price of oil and not speculators.
Thats what happens when you live in a plutocracy. The rich suck up everyones wealth until they become poverty stricken and rise up and revolt. Just like the Russians did almost 100 years ago. Wakey wakey people.
woken up...people just don't know how to do anything about it, or literally don't have the money to. It's too late for the cycle of destruction to be stopped, hoard your seeds and find good land now.
www.forecastfortomorrow.com
... but it IS !
"In fact I have been telling people since the year 2000 that explosive economic growth in China and OPEC manipulation has been driving the price of oil and not speculators."
Is this clown serious with that shit? He is banned from any further mention on ZH. You bring shame to this house by posting that garbage. Supply and demand and OPEC have exactly DICK to do with the cost of oil and gas right now.
Don't hold your breath on that one.
Congress is as complicit as the rest of the fucktards!!
The track record of integrity in US goverment speaks for itself. If this is to fail, it's because that's the intent from the start.
I have to ask....Do you think Geitner, the Bernank, or Obama really gives a shit about congress going ape? Think about...What can Congress really do if they breach the debt cieling mark? I don't think the administration, the fed, or turbo tax Timmy really cares about the law.
They will have a meeting, and gather notes. In a year they will finally get around to pointing fingers.
and they'll appoint a "Blue Ribbon" Commission
If congress pays attention and sees they were sidestepped by the treasury they will go ape shit. No doubt, they want to have a show of force and take the spotlight. This will get messy really quick.
I hope that they hold treasury and the fed accountable. Pray.
Since when are the wall street representives in government concerned about legality?
They didn't care when they lied under oath to congress about monetizing debt, or the numerous other times they broke laws.
... legality is only a concern of serfs.
Well, we will find out real soon.
If they are anything like the Regulators..."We don't need no stinkin rules...."
On the other hand, you can think of them as a "self regulating" entity... we have seen how that works...
lol. Congress? They're incapable of doing anything. You must be joking.
Let's not confuse the current US with a country that has the Rule of Law. Long ago, we replaced that with the Rule of Men!
+33 sooner or later if we keep calling these fuckers out...
Then replaced that with the Rule of Assholes
They'll just make it up when it doesn't compute like everything else.
2+2 does not equal 4! It equals whatever best fits our interests.
This week it happens to be 3, next week it might be 10. If we need it to equal -4, it will be -4..sit down and shutup.
Nope, like they did with TARP, they'll just use WhiteOut and insert a new number.
http://www.govtrack.us/congress/billtext.xpd?bill=h110-1424&version=enr&...
Plug that shit into Turbo Tax
Bada Bing Bada Boom, solved.
You are operating under the assumption that the law applies equally to all...and as recent history has proven beyond a shadow of a doubt...that is NOT at all the case.
They will do whatever the fuck they want and nobody will say or do a goddamn thing about it.
That's how dictatorships work.
Spot on - there is no debt limit
yep. +1
Hmmm, when was the law to enact the federal reserve passed? December 26th?
We'll have an emergency session during easter break to 'fix' this.
Conversely... the mainstream media ignores it and it all goes away.
I agree - EU Greek bailout / haircut, Government debt ceiling,QE3 (not) announcement...
All will be done while we're on holiday - gives the Gubbermint time to prepare...
I can already smell the headlines... - First US bonds auction fails, dollar falls to all time lows! - CNBC
But of course, it's all bullish, since it helps US exports right? :)
My guess for the headline would be "Treasury cancels 99B Bonds Auctions -as it expects surge in tax revenues due to unprecedented US economic growth"
As for the dollar...well...if Cramer says a low dollar is good for stocks, then isn't that what we all want? Gosh what's wrong with you, don't you listen to Cramer?
Such a sky you never did see!
Who will tie it up with a ribbon
And put it in a box for me?
There'll never be a day so sunny,
It could not happen twice.
Where is the man with all the money?
It's cheap at half the price!
Who will buy this wonderful feeling?
I'm so high I swear I could fly.
Me, oh my! I don't want to lose it
So what am I to do
To keep the sky so blue?
I thought I recall Timmy having a playbook of "emergency measures" that are good for another $150 bill or so.
Emergency measures = erase some zeroes, click Apply, OK.
Remember that...I thought I had that bookmarked but couldn't find it
They can and will do what they want!!!! period
How can they do this? What happened to the rule of law?
lol
reminds me of the line from Raiders of the Lost Ark. "you can't do this to me, I'm an AMERICAN!"
the legal system itself was created to favor the oligarchs and give the illusion of fairness. kinda of like the U.S. "democracy". all show for the silly goy.
A library full of laws for us that we must not break or we will be instantly thrown in jail and...
none for the power leeches.
and they will just scream and scream and threaten that the world will end if they don't get their way
They will only auction under the debt ceiling and will take the money from the pension funds to fund the government.
Or they'll declare martial law in congress (like they did a few times before) to pass a debt ceiling increase on May 1.
The Pigmen will always bend the rules and screw the little guy.
Learn it, love it, trade it.
I'm thinking when foreign bondholders see that the debt ceiling has been breached in violation of the law, and nothing happens, they are going to dump their US debt.
Are you kidding???
Nobody cares about the law, except slaves. The Pigmen make their own.
Your routine is tiresome, and not funny in the face of this.
Lunatic libertarians will always be screwed by the Pigmen. Why? Because the first care about moral and law, the others do not.
Learn it, love it, trade it.
The 'debt ceiling' (LOL) will be hiked by an Obama decree voted in secret, and we'll be on our way to DOW 15,000 in June.
Thanks for the truth Hamy;
Indeed they will do what they want. Whether we like it or not power has corrupted the governing elite. Who in Congress or the Executive Branch has the ability to stop this insanity?
Fatalistic prisoners dilemmas are the hobgoblin of simple minds.
"Lunatic libertarians will always be screwed by the Pigmen. Why? Because the first care about moral and law, the others do not."
Oh the plight of the heroic libertarians. Gimme a break. If you think being completly self-centered and tribal is the noble path in this life, then you might have a lot to learn from a pig.
Centering society around the individual is different from being self centered. If we were just self-centered, we would all be politicians and bankers.
The propensity to ostracize and attack Libertarianism is fascinating. Should a little corner of the globe ever secede to practice this philosophy, what arguments would be levied in favor of invasion to quell the heresy?
The same ones that have been used to justify the arming of the innumerable Somali strongmen who fight over Mogadishu, alongside the near continuous invasion from Ethiopia, and foreign forces from further abroad, even as the countryside remains firmly under the gentle grip of Xeer.
Minor modifications to Xeer, including the introduction of social insurance companies (rather than clan-based insurance), would allow foreign investment, and would foreshadow a rapid industrialization effort that would put China to shame.
Maybe it's my 'murican naiveté, but I've never been able to relate to Somalia. It's most people's default argument against elimination of the central state, guess I need to study up...
I don't see how one can compare their situation to one of a more technologically [communication] advanced society, and this line of thinking always credits the state with providing the conditions for technological advancement. All your prosperity are belong to us.
What's abundantly clear is the state will not peacefully coexist with internet, and my money's on The Rogue.
Personally, I tend to mock Libertarians mostly when they take themselves so incredibly seriously. The ones with a sense of humor are fine--they're usually ready to admit that they're just hippies who want a state to help protect them from the impoverished masses.
When you come down to it, save the argument that it's some noble heroic moral brilliance that inspires it and you'll do better.
http://yeahtwins.com/wp-content/uploads/2009/08/PigRoast1.gif
Nobody cares about the law, except slaves.
And creditors
Junked
creditors themselves are slaves to the debts they own - depending on how much you owe, you may own the lender or the lender may own you
Legal?....come on
Tyler, the PWG can handle $4 billion, in like, fifteen minutes.
Fuck the fed-- end it, reform the treasury, and replace these monkeyfuckers we call policymakers.
I'm the seller (slap!)
I'm the buyer (slap!)
I'm the seller (slap!)
I'm the buyer (slap!)
With Faye Dunaway in the role of Ben Bernanke
Zimbabwe here we come! All aboard the "Winning the Future" train.
Was this the hope or was this the change?
The winning the future train is called the Hope & Change Express...just to cover all the bases.
I think the name of the future train is called " Norfolk & Waypal ".
+ 14,000,000,000,000
Neither, it's W-T-F! Winning the Future, (wink, wink)
Cdad reporting from the BlowHorn [CNBC] front....this just in....
As Tyler Durden contemplates a possible surprise US T bill default, E. Burnett and M. Haines are deeply involved in a discussion about underwear sales. They actually have an underwear indicator on the screen now, and people look very seriously concerned. Apparently, an underwear snap back is about to occur. And also apparently, if it does not, it may mean the end of...something...not sure.
In the meantime Banana Republic Tree Ben Bernanke continues to lob fiscal cruise missiles at other nations, ramping up bitterness and thus throwing gasoline on the currency war he started...while he is exactly one week away from a debt ceiling dead end. Great!
I see the masters of the universe, otherwise known as the criminal syndicate Wall Street banking cartel has NOT learned its lesson yet...despite $5 trillion in stimulus and free money.
But never mind...and keep your eye on the BlowHorn [CNBC] underwear indicator! Replace your underwear today or your Republic may not survive.
Good grief [and by that I mean holy crap this is a deep cosmic bunny hole I have tumbled down. Lil' help?]
Additionally: unless my bunny hole is too dark, look at a chart of EAT. Does anyone actually see any shares trading hands? Did Wall Street invent a new helium based trading platform that I do not know about?
that rabbit hole is actually worm hole.... just a flavor here, but pretty good illustration of who really has been in charge of the U.S.:
http://forum.prisonplanet.com/index.php?topic=51466.0
Welcome to Alice in Weimarland
Oh please, Treasuries will be offered. The PDs will buy every last one.
Ben.
http://www.bloomberg.com/news/2011-04-19/bernanke-may-reinvest-maturing-...
Fed may keep QE going by reinvesting maturing debt -- as Rickards predictedhttp://www.gata.org/node/9826
That the Fed will continue reinvesting debt is nothing new and is the model from QE Lite w/r/t keeping the balance sheet flat. That this will have no impact on the risk bid (as overdiscussed before) is why the Fed will not be satisfied with this outcome.
$4 billion swept under the rug? No problem. Chump change now.
$4 billion swept under the rug? No problem. Chump change now
The price of 400 Main Battle Tanks or Attack helicopters is chump change. Got it.
The Law is meaningless. Debt ceiling is meaningless- just have the fed buy direct from the treasury- cut out the middleman. Problem solved.
Nope. Those middlemen (the PD's) own this racket and will not be cut out, unless the Fed can just give them a cut directly. Hey, maybe you're on to something after all.
If the Fed did buy direct I wonder what the backdoor payout cut would be for the PDs, and how it would be paid. What % would be the cut for the bosses? Excellent question.
Why bother with the kabuki of auctions, POMO, etc. ???
Just have the Fed credit the Treasury account with $99 billion of newly created electronic "money" and be done with it. Then, when the interest is due, Treasury can credit the Fed with the interest, and the Fed can simply credit it back.
And when the debt matures...lather, rinse, repeat.
How hard is this?
As the Brits would say;
The illusion "dear boy" must be maintained. This is almost as important as the auctions themselves.
Just wondering - assuming they actually breach the debt ceiling. Who would prosecute ? Under what statute ? Concretely what could happen ?
When bond sales are outlawed, only outlaws will sell bonds!
How this is different than any other auction is just a matter of semantics.
Who would prosecute ?
Who is in charge of the executive branch again? There's your answer.
legally... shmeegally
Law, what law? A law for who? You silly peons.
And while we're at it...who's gonna stop them from continuing on? Has a law or constitution been a hindrance up to this point?
So far the closet thing I've seen to a restraint involved a blue dress and the definition of is.
When people run in circles, it's a mad world-- a mad world.
Tyler, didn't you already answer that question?
http://www.zerohedge.com/article/tim-g%E2%80%99s-bank-%E2%80%93-%E2%80%9...
CSR&DR FTW!
There will be no problem auctioning off Treasurys next week. I happen to know that there will be a mad dash for these financial IOUs from JPM, GS, Caribbean Banking Centers, dictators, puppet government leaders, unspecified London financial groups, drug dealing money launderers, and financial plunderers everywhere.
Just seen a brilliant Tweet by Joe Saluzzi of Themis trading regarding next week's Benny boy press do -
"my quest: Mr Bernank, who changes the date on the same press release that you issue at every meeting? Do they use whiteout?"
http://twitter.com/#!/JoeSaluzzi
Brilliant!
DavidC
Can it? Yes it can. Will it? Yes it will... No Diagram needed
of course it can auction 99b (chump change).....it could auction 99t if it wanted....couldn't it, ben??
Yeah. Like everyone else here, I've been watching as we close in on the legal debt ceiling. Asking myself, what would be the consequences of illegally breaching the debt ceiling.
Like many others, I just assumed the current debt ceiling would be honored as the law of the land, and presumably raised again by a dishonorable Congress. All within the confines of current law.
What if the debt ceiling is illegally breached? Consequences? Hmmmm. I'm thinking of a little story about unsecured bond holders of GM illegally given priority over secured GM bond holders. Breach of contract law? Consequences?
(I wonder if S&P had some interesting "policy" information regarding this matter prior to their surprising downgrade of US sovereign rating.)
I can't believe we've been allowed to continue the charade this long. They must have some sweet deals worked out behind closed doors. It is as if we're some terrible comedian who just won't leave the stage while the audience refuses to do anything but sit there and cringe.
Paging Justice Scalia...constitutional crisis in 3...2...1...
Ha ha. "Debt ceiling!" As far as Tim and Ben are concerned, it's the same ceiling as the one on the Fukushima reactor.
This is a process that is playing out for us. Still will take time, the bull is in place....for now. Patience, conviction and understanding of what is going on is paramount here. And, most of us get it. (Except for Robot).
There once was a debt ceiling crisis
Created by Politicians and their vises
Hero Ben flew in
With his printers again..
and said "Never fear I'll just make more with these devices."
See, problem solved.
As if the government and it's puppeteers worry about the legality of anything they do. Laws are for their use to keep the masses in line.
Maybe Timmy plans to pay the difference by finally paying his taxes.
If they (Timmy and company) go on about their business of creating illegal debt and make their own rules I wonder if we'll start to see more institutional PM holders like the University of Texas endowment taking physical delivery, and more bond holders like PIMCO selling, out of feer/protest...
Yes they can, for some more time.. Geithner and Bernanke can do any magic trick they want with money!
http://www.businessinsider.com/tim-geithners-bag-of-tricks-2011-1
my ass...I'm not buying anything from these turkeys, can they really hope to auction off more derivatives in the face of such newsworthy physical prices?
www.forecastfortomorrow.com