Treasury Hopes To Auction Off $99 Billion In Bonds Next Week... But Can It?

Tyler Durden's picture

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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TheGreatPonzi's picture

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. 

jus_lite_reading's picture

Either of the two brings WWIII and Mad Max... get the party started now

Harlequin001's picture

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...

Imminent Crucible's picture

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.

Harlequin001's picture

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.

hannah's picture

paulson's 3 page 'plan' gave the fed/treasury/congress the power to do whatever they want whenever without regard to 'the laws'.....

Id fight Gandhi's picture

No they can't it would be illegal, congress would/should go ape.

Long-John-Silver's picture

congress has been neutered. Obama and his Czars control US.

whatsinaname's picture

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 - - 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.



averagejoe's picture

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. 

tomster0126's picture

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.

dearth vader's picture

The Untied States of America is running a dangerous deficit printing money like it is going out of style...

... but it IS !

j0nx's picture

"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.

Translational Lift's picture

Don't hold your breath on that one. 

Congress is as complicit as the rest of the fucktards!!

Nobody special's picture

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.

Cole Younger's picture

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.

Fish Gone Bad's picture

They will have a meeting, and gather notes.  In a year they will finally get around to pointing fingers.

Cow's picture

and they'll appoint a "Blue Ribbon" Commission

Id fight Gandhi's picture

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.

njdoo7's picture

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.  

rufusbird's picture

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...

Popo's picture

lol.  Congress?  They're incapable of doing anything.  You must be joking.

Bearster's picture

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!

gordengeko's picture

+33 sooner or later if we keep calling these fuckers out...

Diogenes's picture

Then replaced that with the Rule of Assholes

6 String's picture

They'll just make it up when it doesn't compute like everything else.

njdoo7's picture

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.

dracos_ghost's picture

Nope, like they did with TARP, they'll just use WhiteOut and insert a new number.

bob_dabolina's picture

Plug that shit into Turbo Tax

Bada Bing Bada Boom, solved.

alien-IQ's picture

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.

Terminus C's picture

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.

writingsonthewall's picture

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...

lolmao500's picture

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? :)

I Am The Unknown Comic's picture

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?

writingsonthewall's picture
Who will buy this wonderful morning?
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?
averagejoe's picture
WOTW, you been eating too many of those magic mushrooms you've been growing down the allotment?
redpill's picture

I thought I recall Timmy having a playbook of "emergency measures" that are good for another $150 bill or so.

CosmoJoe's picture

Emergency measures = erase some zeroes, click Apply, OK.

mirac's picture

Remember that...I thought I had that bookmarked but couldn't find it

The Axe's picture

They can and will do what they want!!!! period

Josephine29's picture

How can they do this? What happened to the rule of law?

redpill's picture


reminds me of the line from Raiders of the Lost Ark.  "you can't do this to me, I'm an AMERICAN!"


john39's picture

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.

Racer's picture

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

lolmao500's picture

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.

HamyWanger's picture

The Pigmen will always bend the rules and screw the little guy.

Learn it, love it, trade it. 

tmosley's picture

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.

HamyWanger's picture

Are you kidding??? 

Nobody cares about the law, except slaves. The Pigmen make their own.