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US Treasury Delays Debt Ceiling Expansion, Q4 Borrowing Needs Shifted To Q1 2010
The US Treasury today announced a preliminary estimate of borrowing needs in the Q4 2009 and Q1 2010 quarters. The October-December borrowing need has been revised lower to $276 billion from the $485 billion announced in July 2009. The primary reason for the decline, aside from the need to stay below the $12.1 trillion debt ceiling which would have already been breached had this number been in line with prior expectations, is due to the $185 billion refunded from the Supplementary Financing Program announced earlier, which as of October 28 has been completed. Yet, like everything else with the current administration, current peace of mind comes at a magnified future cost: the US Treasury now expected to issue $478 billion in Treasurys in Q1, and coupled with a net cash decline of $40 billion from Q4, implies that in Q1 2010 over half a trillion in debt will be issued net, if not more.
The full release from the US Treasury:
Washington, D.C. -- The U.S.
Department of the Treasury today announced its current estimates of
marketable borrowing for the October – December 2009 and the January –
March 2010 quarters:
- During the October – December quarter, Treasury expects to issue
$276 billion in net marketable debt, assuming an end-of-December cash
balance of $85 billion, which includes $15 billion for the
Supplementary Financing Program (SFP). The borrowing estimate is $209 billion lower than announced in July 2009. The
decrease in borrowing is primarily related to cash balance adjustments
related to the SFP, and lower outlays offset partially by lower
receipts. -
During the January - March quarter, Treasury expects to issue $478
billion in net marketable debt, assuming an end-of-March cash balance
of $45 billion, which includes $15 billion for the SFP. -
These estimates do not include any incremental borrowing needs
that would result from a potential increase in issuance under the SFP.
During the July – September 2009 quarter, Treasury issued $393
billion in net marketable debt, finishing the quarter with a cash
balance of $275 billion, of which $165 billion was attributable to the
SFP. In July, Treasury had estimated $406 billion in
marketable borrowing for the quarter, assuming an end-of-September cash
balance of $270 billion. The decrease in borrowing was primarily a result of lower outlays.
How does this statement compare to expectations? Below we present Goldman's response to this release out of the UST.
1. As we had expected, the Treasury reduced substantially its estimate of how much borrowing it will do in the fourth quarter, reflecting the paydown of the Supplemental Financing Program (SFP) that has already occurred. The Treasury's estimate was still $36bn higher than we had forecast but virtually all of this ($35bn) was due to a higher end-of-quarter cash balance than our assumption (Treasury shows $85bn, we had expected $50bn).
2. The Treasury's estimate for the first quarter is substantially higher than we had anticipated -- $486bn [sic] versus our expectation of $420bn -- and this time the cash balance works the wrong way (For Q1, the Treasury assumes a $45bn balance, down $40bn from its Q4 assumed level, while we figured only a $15bn further drawdown in the balance).
3. On balance, these figures underscore the large amount of borrowing the Treasury anticipates, though most of the surprise slants toward the first quarter. Since the Treasury has said very clearly that it intends to lengthen debt maturities, we expect this quarter's refunding to increase $3bn over the same operation in August. Specifically, we look for $40bn in 3-year notes ($1bn more than in August), $25bn in 10-year notes (a $2bn increase), and $15bn in 30-year bonds (no change from August). This $80bn package would redeem $43.5bn in maturing securities and raise $36.5bn in new cash. Treasury will announce the details of its package on Wednesday at 9am, EST.
4. The more interesting issue to be addressed in this announcement is how they plan to grow the TIPS market. The August refunding statement reiterated the Treasury's commitment to this market and promised more on this at the November refunding. To date, the additional commitment has meant increases of just $1bn in each of October's TIPS auctions, but we think a more substantial change could occur in Wednesday's statement. In particular, the agency is likely to substitute 30-year TIPS for 20-year TIPS; it could also decide on a monthly auction schedule although this is not our central expectation.
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Yaaaa, No more digitizing FRN's until Q1 2010,,, Thats like saying &^*(#$%^I promise..
I'm finding this hard to take serious anymore....
Who is going to buy all of this debt? and at what rate? with debt increasing quarter after quarter for a decade?
Also, I think most people would agree that the revenue projections in Obama's budget are way to optimistic. I am looking more towards 2T average for the next 3 years. Unless more stimulus skews tax receipts as it did in FY2009.
Mark Beck
You ask the question on my mind. Used to be that a bad deficit year was $500 bil total, inclusive of borrowing out of the Soc Sec Trust Fund. Now we add that much in a quarter, and it's all public debt. I guess this is something that we're supposed to get used to, but that doesn't mean it's actually possible, since it's unprecedented. It's crazy in fact.
And gold just sits there. I wonder why.
Maybe I should ask Jon Nadler and Mish Shedlock. The Double Mint Twins.
Gold up $18.90 for the day... I agree, it should be moving by 50 a day. As it relates to Mint twins ... Try Peter Schiff
Thanks. Schiff is good but I need someone to help out the poor fuckwads at Barrick to close out their shorts. Seems they can't do it fast enough.
http://www.reuters.com/article/basicMaterialsSector/idUSL272564320091102
Extend and Pretend is the Hallmark strategy for these guys.... I wonder if they really believe everyone is this stupid to believe them anymore or perhaps they know they're now in so much shit, they simply no longer care.
All this means is the Fed will have to print more through some various programs.
I wonder how they are going to bail out the FDIC and/or FHA? Maybe they can both issue debt that Zimbabwe Ben can buy.
Oh stop it with the monetization! Zimbawecopter Ben needs a little ride into Iraq. He can catch the money he dumped on it when W was his boss and perhaps step on a land mine. Let's think positive here.
May you live in interesting times.
1. close FDIC, eliminate deposit guarantee.
2. open TDIC (treasury deposit insurance corporation).
3. insure all TDIC deposits in US Treasury Securities.
4. Profit
You forgot to sieze all IRA's and create the GRA. Please go back to your post on Stimulas 2.0...I have replied to Rahm!
Best not to go to the well prematurely. A lot can happen in a short period of time. They may need a T by Q110.
Goldman's CFO like commentary made the Board very happy.
How about this? I'm the Fed and you're the bank (GS) and I need you to take out a loan at .25% interest so you can buy this Treasury which pays 3.25% Are you interested? How many billions do you want? Oh, how many are you offering this week? I think I'll take them all. (Actually, it's kind of a no brainer--no one else in the world is doing this, or has even thought it possible, so they're just letting it go down). By the way, since you're a primary dealer, you get 0.25% right up front for selling the treasury to yourself.
Sweet, I'm in !
...the bank may get the coupon, but they'll never get their principal back. But they never have to repay the loan.
Do they just stumble into these schemes, or does some amoral genius design this stuff?
Crafty.
Interesting trick. I wonder what the reprecussions are in terms of higher borrowing needs due to the delay in issuence. They might be kicking themselves in the foot if rates rise in the next few months.
Also, how is the FDIC going to tap that credit line if the Treasury can't issue more debt? It might have to borrow money from the Fed.
I have it on good intelligence that they are going to tap GG. A squirrel in his backyard has hit paydirt.
As my Uncle Louie would say...
"Why do today, what you can put off until tommorrow."
Apparently the lazy, mooching bum was right.
more Schiff. Guys like this running for office might be this country's only chance.
http://www.youtube.com/watch?v=XToWFdS44A0
td check this out...the guy who runs the FED's equity purchasing and bailout trading desk
Mr. Sack rejoined the Fed in June to succeed Bill Dudley as head of the markets group after Mr. Dudley became president of the New York Fed.
The markets group grew enormously during the crisis, from about 225 employees to 400 people who monitor the markets for the Fed, manage its portfolio and run the many new trading programs it has started. The Fed holds more than 20,000 individual securities.
http://online.wsj.com/article/SB125720947716624249.html
So lets think about the timeline here.
First, a few weeks ago, they canceled the SFP.
Second, amount of money to be auctioned this quarter is announced middle of last week.
Third, the Treasury announces that the amount auctioned is going to be reduced b/c of the SFP being canceled.
Call me a cynic, but what were they planning on using this money for before they realized that the debt ceiling wasn't going to be raised? I have a sneaking suspicion that congress hadn't sign off on what was about to be doled out, and the treasury doesn't care.
I was just at Hulu watching The Office and the program was sponsored by...
The FDIC?
Yup. Ads and everything telling me to trust the banks and to keep my money there. WTF?
Spy vs. Spy ... Those who have anything vs. those who want everything
It would have been nicer if it had read, US Treasury cancels debt ceiling expansion. But alas, if the FDIC could make bank failure reporting a quarterly report, then the Treasury could make requesting an increase in the debt ceiling a quarterly excercise.
But, I guess, one can travel from Miami, Fl. to Lake City, Tn. on US 441, just as well as taking the interstate. It may take forever on 441, but the destination will be the same- nowhere.
AUDIT THE FED BILL GUTTED by Mel Watt of NC---(Here is what you can do)--
CALL THIS CORRUPT CRIMINAL (Defending Bank of America in his district of Charlotte)
at Tel. (202) 225-1510. Demand to know WHY he choses to destroy America at your childrens expense!!
This should come as no surprise but Ron Paul says Federal Reserve Policy Audit Legislation ‘Gutted’
Representative Ron Paul, the Texas Republican who has called for an end to the Federal Reserve, said legislation he introduced to audit monetary policy has been “gutted” while moving toward a possible vote in the Democratic-controlled House.
The bill, with 308 co-sponsors, has been stripped of provisions that would remove Fed exemptions from audits of transactions with foreign central banks, monetary policy deliberations, transactions made under the direction of the Federal Open Market Committee and communications between the Board, the reserve banks and staff, Paul said today.
“There’s nothing left, it’s been gutted,” he said in a telephone interview. “This is not a partisan issue. People all over the country want to know what the Fed is up to, and this legislation was supposed to help them do that.”
Paul, a member of the House Financial Services Committee, said Mel Watt, a Democrat from North Carolina, has eliminated “just about everything” while preparing the legislation for formal consideration. Watt is chairman of the panel’s domestic monetary policy and technology subcommittee.
Keith Kelly, a spokesman for Watt, declined to comment and said Watt wasn’t immediately available for an interview. Watt’s district includes Charlotte, headquarters of Bank of America Corp., the biggest U.S. lender.
Call The Capital Switchboard
Conservative For Change has this advice in Ron Paul's Audit the Fed Bill Gutted.
It is time to get on the phone with everyone in Washington...Congressman and Senators and demand action against the illegal Federal Reserve. Call the Capitol Switchboard 202-224-3121 and speak with everyone you can!
Call Democratic Central Committee
On October 8, in Audit The Fed Revisited Jacob Dreizin offered this advice.
Without a flood of citizen lobbying, they will most likely water down H.R. 1207 into something meaningless, or else ignore it altogether.
The committee Democrats' central phone number is (202) 225–4247, and the fax is (202) 225-6952. Alternately, and perhaps more effectively, you can politely email some or all of the committee's most senior Democrat staff directly, as follows:
Could this turn out to be a mere shell game:
* ... The decrease in borrowing is primarily related to cash balance adjustments related to the SFP, ...
* These estimates do not include any incremental borrowing needs that would result from a potential increase in issuance under the SFP.
... in other words, despite its much vaunted independence, the Fed is printing more money (at least temporarily) in order to help the Treasury avoid the debt ceiling for a little longer.
From the November 4 quarterly refunding announcement:
"Despite the recent decision to reduce the size of the program, Treasury retains the flexibility to increase the SFP in the future. Such a decision will be made in coordination with the Federal Reserve."
http://www.treas.gov/offices/domestic-finance/debt-management/quarterly-...
12 Trillon in debt seems like a lot to me. Given the size of our economy and our earning power - what should the optimal debt load be?
The USA GDP is about $14 Trillion, so if the government thinks it owns everything the private sector thinks it owns, the Federal government is 100% leveraged.
The USA 2009 Federal Budget was almost $3 billion, so that means it's leveraged 4x already. It couldn't get a home mortgage for that, although I bet Fannie & Freddie would have no problem doing the paperwork for them and giving them the money.
It's a joke. It will never be paid back. We're looking at USA Federal Sovereign Default within two years. Watch California and New York for how that goes down (there will be similarities).
Are you advocating for a debt level of zero. I'm not sure any nation has that and very few corporations or individuals would fall into that category.
Is leverage defined as a ratio of debt vs. income? I would have thought leverage would have been more in relation to equity and the debt to equity mix in turn supports the asset base.
For example a home owner would most certainly have a mortgage that exceeds thier income, but the leverage would be measured as a ratio of the debt to equity and the equity would be defined as the market value of the home minus the debt.