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US Treasury Pays Down Over $484 Billion In Bills In April: Debt Roll Concerns Becomes Acute

Tyler Durden's picture




 

Here is the primary risk of why frontloading the US Treasury with ultra-short holdings is just asking for a capital markets/liquidity/solvency/sovereign crisis. So far in April, the US Treasury has redeemed over $484 billion in Bills. That's nearly a half a trillion in mandatory cash outflows, interest payments aside. In April the cash out for interest expense will likely be one twentieth of this. What people don't realize is that the Treasury in April was down to just $9 billion in cash. Unless the UST can roll its debt not on a monthly but now weekly basis in greater and greater amounts, the interest rate doesn't matter. All it takes is one semi-failed auction and it's game over as hundreds of billions in bills become payable.

When one adds the redemptions on non-Bill Treasuries, and we get well over half a trillion in redemptions in April alone. This is better known as a house of cards, balancing on an upside down ladder, located in a puddle of extra slippery oil.

Roll issue aside, the UST issued a net $113 billion in debt in April, coupled with a gross cash burn of 27 billion for a net cash outflow in the month of $140 billion. Add the $120 billion or so in coupons in the last week of April (which likely won't settle until May), and the UST will have a $260 billion in cash burn in April.

 

 

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Tue, 04/27/2010 - 16:48 | 320430 schoolsout
schoolsout's picture

Uh, this stuff goes over my head for the most part, but, uh, things don't sound so honkey dory today

Tue, 04/27/2010 - 17:16 | 320520 RonnieHonduras
RonnieHonduras's picture

No worries. Alfred E. Galbraith says move right along:

http://cosmos.bcst.yahoo.com/up/player/popup/?rn=289004&cl=19331336&src=...

Tue, 04/27/2010 - 18:49 | 320778 potatomafia
potatomafia's picture

Someone tell that fear mongering, pessimism porn addict, gold shill Peter Schiff to shut his yapper!!

 

Look at our debt to GDP!!!!!!!!!!!!!!!!!!  Nothing to worry about here.

 

Hahahaha. 

 

Oh wait, i mean baaaah, baaah.. baaaaah bah..

Tue, 04/27/2010 - 18:59 | 320801 akak
akak's picture

Yeah, I just can't STAND that SOB Schiff ---- I  mean, how DARE he expose the uncomfortable truth and demolish the feel-good propaganda of the hysterically pro-status-quo corporate media?  Doesn't he realize how many Americans are all comfy snuggled up to their green shoots and mustard seeds, with the blanket of "recovery" pulled over their heads? 

(Even if it IS a mighty thin blanket, and those green shoots are turning brown and starting to rot and stink.)

Tue, 04/27/2010 - 17:51 | 320624 John Self
John Self's picture

About as hunky dory as Bear Stearns relying on the repo market for its day-to-day funding.

Tue, 04/27/2010 - 18:09 | 320700 gator gatlin
gator gatlin's picture

Looks like the monthly average YTD is around $472B so what is the big deal with April? Admittedly, they/we have a huge funding problem which will one day blow up but this data point does not stand out as much as the post makes it seem.  No?

Tue, 04/27/2010 - 16:50 | 320439 Dr. No
Dr. No's picture

With the ladder on a bananna peel.

Tue, 04/27/2010 - 18:00 | 320672 Cognitive Dissonance
Cognitive Dissonance's picture

Where's that banana Harry Wanger when we need him? Maybe he was cleaning out his shorts?

Tue, 04/27/2010 - 18:03 | 320687 Mad Max
Mad Max's picture

He's buying AAPL at $260 for 1x future earnings.

Tue, 04/27/2010 - 18:47 | 320780 akak
akak's picture

BUY BUY BUY!!!

Tue, 04/27/2010 - 21:49 | 321071 AccreditedEYE
AccreditedEYE's picture

I'm very comfortable having him on the other side of my AAPL trade.

Tue, 04/27/2010 - 21:26 | 321042 Crime of the Century
Crime of the Century's picture

He's at the coin shop with Bates...

Tue, 04/27/2010 - 21:30 | 321049 akak
akak's picture

Bates is now "Johnny Bravo", did you know?

You should have no trouble finding him, though --- just look for any article that touches on gold or financial collapse (the Achilles' heel of the pro-establishment troll), and his comments are sure to be found beneath.  Like a shit-eating moth to a golden flame, they simply cannot resist being attracted to such discussions.

Wed, 04/28/2010 - 00:54 | 321256 Alienated Serf
Alienated Serf's picture

lol@ (the Achilles' heel of the pro-establishment troll)

Tue, 04/27/2010 - 16:52 | 320442 casino capitalism
casino capitalism's picture

The financial system of the world is a house of cards.

Tue, 04/27/2010 - 16:52 | 320445 Mongo
Mongo's picture

Got silver?

Tue, 04/27/2010 - 16:55 | 320452 tmosley
tmosley's picture

Looks like the US won't be able to roll over its mortgage like it's broker promised it would, and it's facing one hell of a balloon payment.

The only question left is, where does America mail the keys?

Tue, 04/27/2010 - 17:34 | 320573 faustian bargain
faustian bargain's picture

China?

Tue, 04/27/2010 - 17:43 | 320599 ZerOhead
ZerOhead's picture

Sounds about right... they are always looking for more scrap metal...

Tue, 04/27/2010 - 16:55 | 320455 tecno242
tecno242's picture

no worries, the banks will bail out the government with all their profits. LOL

Tue, 04/27/2010 - 16:56 | 320457 monmick
monmick's picture

...while there is 7.2 earthquake occurring...

Tue, 04/27/2010 - 17:01 | 320479 Assetman
Assetman's picture

...those are Bernenke's knees, you silly boy!

Tue, 04/27/2010 - 18:00 | 320670 Kitler
Kitler's picture

They are moving the last of the nations gold out of the Fed's vault?

Tue, 04/27/2010 - 16:56 | 320459 whatsinaname
whatsinaname's picture

yeah got silver but gold is shining more today poof..

Tue, 04/27/2010 - 17:09 | 320501 aurum
aurum's picture

give it time...silver will be the sheeples gold when they finally wake up.

Tue, 04/27/2010 - 17:20 | 320530 Postal
Postal's picture

Silver is this sheeple's gold, as silver is the PM I can afford. :-(

Tue, 04/27/2010 - 17:54 | 320647 aurum
aurum's picture

you're not a member of the sheeple...you're buying PMs now and are, at the very least, informed enough to be reading ZH...its going to be interesting to see the % gain differences among the PMs from here on out. although i love gold, i believe silver may have a run thats better than most anticipate.

Tue, 04/27/2010 - 17:56 | 320658 malusDiaz
malusDiaz's picture

me too

 

Silver BitcheS!

Tue, 04/27/2010 - 17:57 | 320661 Alienated Serf
Alienated Serf's picture

same here postal. baah baah. 

Tue, 04/27/2010 - 16:59 | 320472 Sudden Debt
Sudden Debt's picture

Half a trillion, that shouldn'd be a problem for America. That's only 2000$ per person living in America!

COME ON PEOPLE!

Everybody chip in!

Tue, 04/27/2010 - 17:00 | 320475 chet
chet's picture

It's like payday loansharking... oops, I mean "lending."  Take out one loan, find out you can't pay it back during the next pay period, so you roll it over.  And keep rolling it over with fees and interest until it doesn't work any more.

Same financial strategy for the US government and the lowliest payday loan borrower.

Tue, 04/27/2010 - 17:21 | 320535 Miles Kendig
Miles Kendig's picture

Exactly.  Our nation is sucked into the payday cash hustle.  deep.

Tue, 04/27/2010 - 17:33 | 320569 cougar_w
cougar_w's picture

Easy out: Murder the loan holder.

Sure that means war, but whoever gets the first good punch in wins.

It was a gamble all along anyway.

Tue, 04/27/2010 - 19:06 | 320819 potatomafia
potatomafia's picture

No, no.  See you just dont "get it".  War is what gets you out of a recession, did you forget about the Great Depression and WW2?  Its really just a big stimulus!!  Keynesian style of course.

Tue, 04/27/2010 - 17:00 | 320477 whatsinaname
whatsinaname's picture

so ZH theory of sell equities to lower rates for debt roll beginning to play out folks ? or just a temp blip on way to bigger bubble ?

Tue, 04/27/2010 - 17:01 | 320480 AR15AU
AR15AU's picture

Nothing a little QE magic can't fix...

Tue, 04/27/2010 - 17:02 | 320482 Catullus
Catullus's picture

Don't worry. The us can still dip in military tsp plans.

Tue, 04/27/2010 - 21:29 | 321047 Crime of the Century
Crime of the Century's picture

A couple billion? That ain't gonna cut it...

Tue, 04/27/2010 - 17:02 | 320484 john_connor
john_connor's picture

Note to sociopaths: cash flow does matter

Tue, 04/27/2010 - 17:17 | 320507 Kitler
Kitler's picture

Then they'll just have make more of it to flow.

I don't know what everyone is so worried about. Obama Economic Recovery Team member and former Harvard brainiac Larry Summers himself said that debt doesn't matter since every debt has a corresponding asset therefore the more we print the richer we (or someone else) gets blah blah blah! He says soon we'll be so stinking rich even kids selling lemonade will be millionaires just like in Zimbabwe...

And a short term debt problem has got to better than a long term debt problem... right Larry... Larry?

Tue, 04/27/2010 - 17:18 | 320525 john_connor
john_connor's picture

it is a negative feedback loop.  "making more of it to flow" will just cause a bigger problem.  huge currency swings are outlet valves to all of this but sovereigns are at the limit because they don't have unlimited taxing power.  Riots can shut any country down. 

Tue, 04/27/2010 - 17:24 | 320548 Dr. No
Dr. No's picture

But can they bring down Skynet?  We have yet to learn if John Connor can lead us to victory.  Perhaps my leadership would be better suited to a new world order?

Tue, 04/27/2010 - 17:37 | 320577 ZerOhead
ZerOhead's picture

Agreed. We cannot take a chance on John Conners' unproven leadership...

I vote NO!

(Dr. No that is...)

Tue, 04/27/2010 - 18:47 | 320781 lucky 81
lucky 81's picture

'without conscience' and 'snakes in suits' . must reads. 

Tue, 04/27/2010 - 22:41 | 321120 aaronvelasquez
aaronvelasquez's picture

Thank you.

Tue, 04/27/2010 - 17:02 | 320485 docj
docj's picture

You worry too much, Durden.  I'm sure Barry, Turbo Tim and Benron have it all under control.

You can stop laughing anytime.

Tue, 04/27/2010 - 17:04 | 320489 rubearish10
rubearish10's picture

So, as long as European Crisis stays on the front pages, UST should be able to raise money. Can't wait for the opportunity to buy more Gold, unless that chance is over??

Tue, 04/27/2010 - 17:53 | 320637 tmosley
tmosley's picture

Options and futures contracts are expiring this week.  If there isn't a buying opportunity Thursday or Friday morning, you may indeed have missed your chance (as that is when the manipulators are out in force).  If they fail to force options contracts out of the money, then the manipulation may well be at an end, and you will just have to buy the grind as it works its way up to $2000 and beyond.

I woud hold off judgement on the manipulation being over until I see two or three months with options expirations that don't contain mysterious selloffs.

Tue, 04/27/2010 - 17:05 | 320491 Postal
Postal's picture

Didn't the Grand High Squid declare just a few days ago that U.S. debt wasn't a problem?

Tue, 04/27/2010 - 17:09 | 320502 kaiten
kaiten's picture

So this is the whole Greek story about - distraction.

Tue, 04/27/2010 - 17:10 | 320506 buzzsaw99
buzzsaw99's picture

I've been reading this stuff for years. Bond crash imminent. LMAO!!!

Tue, 04/27/2010 - 20:34 | 320973 drwells
drwells's picture

Take out "imminent", though, and it's still true.

Tue, 04/27/2010 - 17:10 | 320510 wcvarones
wcvarones's picture

Sounds like it's time to cut out the Dirty Fed middleman and just have the Treasury start printing its own.

Tue, 04/27/2010 - 17:16 | 320516 buzzsaw99
buzzsaw99's picture

You're gonna get disappeared talking like that.

Tue, 04/27/2010 - 17:29 | 320561 Kitler
Kitler's picture

I think he's already "Been there - done that!"

Something about payment for oil in Euros.

Tue, 04/27/2010 - 17:38 | 320580 buzzsaw99
buzzsaw99's picture

Khalid Shaikh Mohammed was buying oil for Euros?

Tue, 04/27/2010 - 17:53 | 320620 Kitler
Kitler's picture

Christ my eyes (or brain) must be going. That dude looked just like Saddam after a long night out!

Tue, 04/27/2010 - 19:11 | 320826 potatomafia
potatomafia's picture

... and here i thought it was rosie odonnell?

 

http://www.onejerusalem.com/wp-content/rosieksm.jpg

 

 

 

Tue, 04/27/2010 - 20:09 | 320927 Janice
Janice's picture

Funny!

Tue, 04/27/2010 - 20:49 | 320997 ZerOhead
ZerOhead's picture

Awful... +1

Wed, 04/28/2010 - 01:43 | 321291 Assetman
Assetman's picture

Nope.

Ron Jeremy.

Wed, 04/28/2010 - 02:01 | 321297 faustian bargain
faustian bargain's picture

oh my god.

Tue, 04/27/2010 - 17:16 | 320517 RonnieHonduras
RonnieHonduras's picture

Alfred E. Galbraith says What Me Worry.  (Schiff vs. Galbraith on U.S. Debt)

http://cosmos.bcst.yahoo.com/up/player/popup/?rn=289004&cl=19331336&src=...

Tue, 04/27/2010 - 17:16 | 320521 Orly
Orly's picture

Prolly the reason the markets will now correct.  Can't have risk-loving cash chasing retail stocks now, can we?  We have to bring those yields in so we can roll our debt.

 

Tue, 04/27/2010 - 17:34 | 320572 economessed
economessed's picture

I so agree with this observation of Fed strategy -- they have every incentive to sacrifice equities and drive demand for treasuries right now.  But then what?  Oh yeah -- collapse.

Tue, 04/27/2010 - 17:17 | 320522 mynhair
mynhair's picture

No problem.  Just auction off $2 trillion in 10-yr next week, while Athens and Lisbon burn.

Tue, 04/27/2010 - 17:21 | 320537 MiguelitoRaton
MiguelitoRaton's picture

The printing press eliminates any concern about a failed auction...but it has its own challenges long-term.

Tue, 04/27/2010 - 17:26 | 320555 kaiten
kaiten's picture

Trees shortage, right? ;)

Tue, 04/27/2010 - 19:08 | 320820 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Paper jams, empty ink cartidge; anything can happen when the printer is asked to work 24/7 at full speed.  Also, are we still using that damned ol' FIAT one Tricky Dick ushered in?  I think we is.

Puff Daddy ft. The Lox, Lil' Kim & Notorious B.I.G.- It's All About The Benjamins:

http://www.youtube.com/watch?v=sWrE6DP86hc

Wed, 04/28/2010 - 02:03 | 321298 faustian bargain
faustian bargain's picture

If there's one thing I've learned about printers, it's that they will run out of ink and/or paper during a high-pressure deadline, sooner or later.

Tue, 04/27/2010 - 17:24 | 320546 Steaming_Wookie_Doo
Steaming_Wookie_Doo's picture

Were this a normal person's balance sheet I were looking at, I would be very worried. But does it really matter since they can print all of the reserve currency they feel like? I'm sure there will be some pretense of legitimacy made so that it doesn't look like uncle Ben is raiding a billion Monopoly sets for cash, but that's what's going to happen. I think the politicos feel it is far too risky to cut anyone's pension or tell debt holders that they are irrevocably screwed. They will do everything in their power to wrench a fart from this corpse of an economy in order to prove their re-electabililty and keep the funny-money heroin flowing a little while longer.

Tue, 04/27/2010 - 18:06 | 320694 Mad Max
Mad Max's picture

Why, what harm could ever come from just printing monopoly money to pay all your bills?

If I were a major creditor or supplier I certainly wouldn't have a problem with that.  Nosirree.

Tue, 04/27/2010 - 18:11 | 320697 Mad Max
Mad Max's picture

By the way, I think it's blasphemy to have a Star Wars username while using a Futurama avatar.

So which is it, punk?  The Star Wars Trek, or the Star Trek Wars?

http://www.comedycentral.com/videos/index.jhtml?videoId=166869&title=sta...

Tue, 04/27/2010 - 17:26 | 320554 Sancho Ponzi
Sancho Ponzi's picture

All the liquidity in the world can only go so far when virtually every country is insolvent. 

Tue, 04/27/2010 - 17:54 | 320648 TooBearish
TooBearish's picture

Jeeze Ty I don't get why you don't see this as good news, clearly tax receipts are up, thereby filling the funding gap...I mean, you know, right?

Tue, 04/27/2010 - 17:59 | 320668 Psquared
Psquared's picture

Oh for Pete's sake ... BB said he was not monetizing debt, but he is laying the groundwork for it. I'd say he can buy us another year by having the fed print dollars (yes, MORE dollars) and just buy treasuries outright. No more indirect, direct bidder crap ... just write a check. It won't bounce. What's the price on a CDS on US debt right now?

Tue, 04/27/2010 - 18:04 | 320688 Cognitive Dissonance
Cognitive Dissonance's picture

Agreed. There are many more steps to this waltz.

How many more minor countries can the Fed sacrifice in order to sell more US paper?

Answer? Plenty more.

Tue, 04/27/2010 - 18:03 | 320673 Mark Beck
Mark Beck's picture

Absolutely.

The uneasy cash flow reality of the US Government. For me, it has become one of constant vigil. When they go cash flow negative. My small USD holdings quickly exit.

The battle is lost. It is just how the Treasury will raise the white flag.

There has been considerable debate on how this will play out. The realization is that there must be an anticipitory type of inflow mechanism in place so as to not panic the markets and accomodate the slow clearing process of Government transactions.

Meaning, the FED must always provide some QE slack, through whatever pipeline, as to the Treasury monthly outflows required per anticipated receipts. The logical avenue at this time is providing resources to buy the Treasuries in enough quantitiy to offset spending.

ZH has talked at length on how this is being pushed through indirect buys. However, this debt hole has to be fed in continually greater amounts.

What they are doing is a play for time. At some point the FED will have to bring QE back into the open as a policy and this is where it gets fun.

Because at that point the FED is essentially meaningless in its plausibility of purpose.

When it is the policy of the US to fund Government through QE, we do not need a central bank. The fiat money system will be shown for what it is. Control of credit is hollow when the currency is made worthless. Ben can go home. He will not be needed.

This is why there can be no failed auctions as presented in the public domain. The Treasury needs every cent available of declining sovereign debt investment.

It is clear to me that if you where to audit the FED, you would find questionable dealings in porting money to Treasury buys without publically admitting what you are doing. They cannot spook the market, until they are forced to.

Mark Beck

Tue, 04/27/2010 - 18:03 | 320685 Cyan Lite
Cyan Lite's picture

Obviously Greece/Portugal are burning to squeeze folks back into Treasuries.  $118b in issuance this week just needed a little extra bid-to-cover. 

Nothing to see here, move along...

Tue, 04/27/2010 - 18:05 | 320686 Rusty_Shackleford
Rusty_Shackleford's picture

(This was supposed to be a reply to RonnieHonduras's comment)

 

Same vid but you don't have to suffer throught the Ally commercial:

 

http://www.youtube.com/watch?v=fZrWoZiB9HY

 

Pay close attention to how Burnett frames the issue in the beginning.

Total Schiff pwnage of this dipshit.

Tue, 04/27/2010 - 19:48 | 320890 hidingfromhelis
hidingfromhelis's picture

Let me guess, Galbraith is one of the "economists" on retainer to the Federal Reserve.  Nice job of mixing (confusing) ST rates with LT debt markets.  "No, don't watch that hand; watch this hand."  To suggest that the "market" is setting the current fantasy rates is nonsensical, and to expect that the ability to roll over (LT) into the artificially low rates indefinitely is idiotic.  There will be no failed auctions, but monetization and market really are mutually exclusive concepts.

Tue, 04/27/2010 - 18:14 | 320712 FranSix
FranSix's picture

They had better hope to Lloyd Blankfein that short term yields collapse.

Tue, 04/27/2010 - 18:18 | 320718 lbrecken
lbrecken's picture

Sounds like some one is doing the same thing consumers tried before the house crash with using ARMS instead of 30 year fixed mortages to me.

Tue, 04/27/2010 - 18:31 | 320747 johngaltfla
johngaltfla's picture

I can't wait to see what happens when the Chinese announce they are no longer participating in the auctions.

Out in the open.

With fanfare.

As they short the crap out of U.S. Markets and then announce they have bought the remaning IMF gold.

They will mop up and we'll be left with nothing but a sore ass.

Wed, 04/28/2010 - 02:06 | 321300 faustian bargain
faustian bargain's picture

Probably not until after our military is fully committed in Iran and wherever else.

Wed, 04/28/2010 - 09:32 | 321496 False_Profit
False_Profit's picture

...the chinese don't need the imf gold, they are/have been the number one producer of gold.  given their complete (lack of) government transparency, do you think anyone outside of their treasury's vault has the slightest idea that they are actually hoarding 99% of their domestic production?

they know and  understand real money, and they will sacrifice frn$2t in a heart beat since the appreciation of their hard commodities will more than make that up at the same time the frn$ falls...

 

Tue, 04/27/2010 - 18:51 | 320792 SgtShaftoe
SgtShaftoe's picture

A turkey is fed for a thousand days and then...

Wed, 04/28/2010 - 02:09 | 321301 faustian bargain
faustian bargain's picture

+1. I really kinda wish more of the turkeys out there would read Taleb.

Tue, 04/27/2010 - 19:00 | 320805 bigdad06
bigdad06's picture

What are all those chickens doing coming down Wall St.? Oh I guess there finally coming home to roost!:))

Tue, 04/27/2010 - 19:03 | 320813 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

The Treasurie is done.

Get REAL coin.

Tue, 04/27/2010 - 19:21 | 320839 Thalamus
Thalamus's picture

Run for the lifeboats there's only enough for the upper deck.

Tue, 04/27/2010 - 20:18 | 320938 kaiserhoff
kaiserhoff's picture

Fine work Tyler,

Lots of huffing and puffing today, but some of us keep looking for the weak links in the Ponzi.  Of course, they can do it, but how can they hide it???  The game's afoot.  Hail and well met.  I learn things everyday here, and I know no higher compliment.  May all the gods bless.

Tue, 04/27/2010 - 20:20 | 320940 trav7777
trav7777's picture

LOL...this is nothing at all different from last month.

The scalar amounts we're talking about seem to stun people, just further illustrating the fundamental lack of understanding of exponential math.

You SHOULD NOT be surprised by these amounts.  In another few years, they will be double this.  Simple compounding math.

Tue, 04/27/2010 - 20:57 | 321005 hedgeless_horseman
hedgeless_horseman's picture

I agree.  This is exactly why I bought a Porsche 911 in November.  In 24 months I will be laughing about how little I paid. 

Tue, 04/27/2010 - 23:02 | 321146 Dr Horace Manure
Dr Horace Manure's picture

Mercedes S550 here.  May get another one next week.

Fri, 07/01/2011 - 17:32 | 1420263 savagegoose
savagegoose's picture

but of the bonds are due payment and they dont roll em. isnt that $450 bill  extra debt they can take on? sure you roll the bonds, u dont have to pay, the buyer of the new bonds pay. i can see why rolling em is preferable.

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