The Danger In Playing "Debt Ceiling Chicken": $440 Billion In Debt Maturing Before November 15

Tyler Durden's picture

With everyone's attention turning to the debt ceiling X-Date of October 17 (or sooner now that the Pentagon is once again spending money like a drunken sailor following the recall of 400,000 workers or half of the total number fuloughed), some are wondering why is the stock market not reacting more violently. The generic response that has formed is that despite all the feamongering by Obama and the Treasury, even crossing the X-Date will hardly result in the apocalyptic outcome that so many predict as the Treasury can "prioritze payments", i.e., paying some bills and not others, which as we explained before, means paying down debt obligations first, and everything else - whose non-payment does not constitute an event of default under US debt - last. In other words, if the US were to merely live within its means, it should have no problem remaining current on its interest expense even if that means slashing most other government programs.

While superficially this is correct, there is one issue that few are discussing, namely the mountain of short-term debt maturities between October 24 and November 15, which if unable to be rolled over - something that would hardly be able to happen in a time of quasi-technical default - would imply redemption and maturity of the debt without a subsequent rolling over.

The chart below lay outs the amount of Bill, Note and Bond maturities between October 18 and November 15: it totals a whopping $441 billion.

As the Bipartisan Policy Council assessed, correctly, before, the Treasury must roll over well over $370 bn (make that $441 billion per latest calculations) in debt that will mature this year during the Oct 18 – Nov 15 period.

  • When a Treasury security matures, Treasury must pay back the principal plus interest due. Under normal circumstances, Treasury would simply “roll over” the security.
  • As one security matures, the principal and interest for that security would be paid for with cash from the issuance of a new security.

In a post-X Date environment, this operation may not run as smoothly.

Two elements of market risk:

  • Treasury will have to pay higher interest rates to attract new buyers.
  • It is possible, if unlikely, that not enough bidders would appear, forcing Treasury to either use cash on hand to pay off securities that came due or, in a worst-case scenario default on the debt.

Actually, it is very much likely that if there is fear that one or more short-term funding acutions will not result in a prompt repayment, it is virtually assured that the Treasury will simply halt new Bill issuance to avoid the panic that would result from ultra-short term rates soaring and destroying the Fed's carefully crafted ZIRP (on the short-end) policy.

And according to our and the BPC's preliminary calculations, just focusing on simply paying down this debt in the all too likely case that the rollover machinery grinds to a halt, means that the Treasury would be about $180 billion short of paying down just the amounts due in the table above!

So sadly, no. Those who are trying to talk down the severity of even a quasi-technical default, in an attempt to explain why the algos are oblivious to what may happen in ten short days, they have it all wrong. Instead the only logic for the lack of a selloff, is that once again, everyone and the kitchen sink, is 100% certain that should a worst case scenario transpire, it will be the "Mr. Chairman" who once again "gets to work," and makes sure that nobody suffers any loss. After all, the New Normal is all about return; nothing about risk.

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hedgeless_horseman's picture



As the Bipartisan Policy Council assessed, correctly, before, the
Treasury must roll over well over $370 bn (make that $441 billion per
latest calculations) in debt that will mature this year during the Oct
18 – Nov 15 period.

Who cares?  When does TWTRQ open for trading?  Did you hear they already have retail stores in place?  AAPL and FB don't stand a chance.

Herd Redirection Committee's picture

Rollin', rollin', rollin.  Keep that debt a rollin',

WOAR's picture


I think Banzai needs to work on the Bernank's version of Rawhide...

macholatte's picture


Hold on…..

If your parents lent you $100k to buy a house @ 5% interest and then decided to write off the debt – just give you the money, then that $5k per year interest expense you had goes away.


Sooo ….. if the Fed has $2T in UST, why not just torch it and not worry about the bullshit interest payments from the Treasury to the Fed and then from Fed (minus bankster fees, of course) back again to the Treasury?


I don’t get it.  What am I missing?




hedgeless_horseman's picture



Shhh!  You will expose the ponzi scheme that is inherent in the system, and cause the price of gold and silver to rise before we are done buying MOAR.

Also, some very wealthy people have worked very hard setting up a racket to loan money to nations with little risk, significant reward, and relatively low tax consequences.  Do you want to mess it all up?

Sofa King Confused's picture

Confiscate American accounts held in the Cayman Islands.......Problem solved.

nmewn's picture

Confiscate? Was the money earned illegally?

What if Di-Fi's husband sues for damages? ;-)

knukles's picture

Wait wait wait wait wait...
Isn't that the same $2T they lost at the Pentagon on nineleven?
Which was partially found and relost on the pallets of $100s flown into Bagrahm and out again (to Switzerland) on USAF flights?
Or do I have that $2T confused with another $2T?

prains's picture

No,no,'s the other $2T, the $2T Sweaty Paulson snorted off the ass of a Persian Belly Dancer was just throwin around cash for Banksta Bling! cuz theyz be the biggest swingin dicks in town y'all

knukles's picture

Thank God all the Federal Departments of Sophist Economics and Statistics are closed for their fall paid holiday and faux emergency do nothings akin to doing nothings at the office, because without the bullshit numbers I don't have to listen to all the taper this, non taper that, later taper, more taper, early taper, taper taper, maybe taper, when they do taper, is taper tightening of not tightening, will it taper if I squeeze it real hard, do they need enemas or just Colrite?

What a relief.

halfawake's picture

knuk, with your taper-isms above, i think you may be on to a platinum hip hop single.. better drop it quick before benny dolla-dolla bern beats you to it.

dcj98gst's picture

You are right you are missing nothing, but it does not change a thing even if they do this.


The FED is not getting the money back anyways.  The treasury will never raise enought taxes to pay back the debts to the FED.  They know it, we all know it.  It is just for properity purposes to say that they are able to withdrawl the purchases at a later date to "save face" from the fact that we are a bannanna republic that has nothing left but to print foreva.


As far as the interest they return it to the Treasury anyways.

straightershooter's picture


Because the owner of the federal reserve is, guess what, not your parents. ( You're a pusillanious son, "peculating" the hard-earned money out of your parents.)

OK, because the owner of the federal is, guess what, not the citizen, or bag holder, of the USA.




 The owner of the federal reserve is the US BANK CONGLOMERATE:  Banks in the USA will do anything, but definitely not eating the loss. You want the bank to eat 2 trillion loss....NOT GOING TO HAPPEN!

socalbeach's picture

The Fed losses (lowering of interest income) would be passed on to the US taxpayer as a reduction of payments to the US Treasury. See my post below.

Pumpkin's picture

Nothing, I have saying this for 3 years.  Let the beast choke to death.  All the feds profits reverts back to the treasury anyway.

Al Huxley's picture

You're not missing anything, you said it yourself 'bankster fees'.  Some of those a little more knowledgeable with the ponzi say the FED doesn't gain anything because the interest gets credited back to the govt (so it's like free money), always forgetting to acknowledge the fees.  I'm sure that was always the plan.

socalbeach's picture

Here's a little more color on that idea which I brought up a couple days ago. It's similar to the $1 trillion platinum coin idea in that it is an end run around the debt limit. But the debt the Fed has purchased has been effectively retired anyway, so maybe it would fly. It has the advantage over the platinum coin idea in that it only involves accounting entries, and would be less comprehensible to the average person, which would be good from the Fed's POV. A disadvantage is that I don't think it would be reversible:

Key Treasury Cash Payments And Transactions After The X-Date

"One possibility is a variation of Ron Paul's proposal sometime back where the Fed would cancel some of the Treasury debt on the asset side of its balance sheet. They would need an offsetting transaction on the liability side, which would logically be equity. But then the Fed would be obviously insolvent which wouldn't be good PR. So an alternative would be to use an accounting change they made a few years ago whereby they added a liability account which is essentially, "Amt payable to Treasury". That could be reduced instead and become negative, meaning the Fed owes a negative amt to the Treasury. It would be total gimmickry but maybe it would work."

Ron Paul’s Surprisingly Lucid Solution to the Debt Ceiling Impasse

Ac-cent-tchu-ate the Positive: The New Accounting at the Fed

Hippocratic Oaf's picture

Won't happen.

We will not default.

The $$$ is there, it's all bullshit.

Timmay's picture

Agreed. It's called "refinancing", happens all the time. Just raise the ceiling high enough to refinance the debt and dare Obozo to use it on anything else.

Won't let us refinance you say? Look up. See that drone over head?? Oh wait, that's not working anymore? Damn you Putin! 


Oh Bennny......

Rainman's picture

They should sell off all those pesky national parks they aren't running anymore.

Golden_Rule's picture

Well, if they aren't willing to do the right thing, maybe its time for everyone to redo their w4 and claim 100 dependents. 

BigJim's picture

 ...just focusing on simply paying down this debt in the all too likely case that the rollover machinery grinds to a halt, means that the...

'all too likely case that the rollover machinery grinds to a halt'? What has this particular Tyler been smoking?

Whatever it is, don't bogart that joint, Mr D.

CheapBastard's picture

Kardashain is going to give a press conference in 5 minutes about Mily Cyrus....I hope Jason Bieber Tweets his thoughts to us about Mily's Tweeking....I'm getting anxious.

ebworthen's picture

If the Treasury were J.P. Morgan Chase - Ctrl-P at the back door.

However, there are taxpayers involved, and they must be punished!

autofixer's picture

Burn baby, burn!

JFKFC's picture

Why don't these fuckers just insider trade us out of debt? Last I checked, ain't no laws that says they can't.

Grande Tetons's picture

Ben needs more ink. 


Has anyone else noticed that there is no more talk of who will be the Fed Chair? I submit that is because it does not matter. The gig is up. Everybody knows were are in a GLOBAL printarama...and the fact that the markets have not gone more horizontal should yield caution. 

philosophers bone's picture

Defaulting on $440 Billion?  Chump change.  Try monetizing Trillions.

darteaus's picture

Øbama either:

1) Gets full concession on the CR, or

2) Default occurs, fiscal crisis ensues, martial law must be declared "for our safety" and Hugo Chavez de los Estados Unidos is now able to create his Socialist Utopia.


Everybodys All American's picture

When I see Obama speak I hear Hugo Chavez. It's as if Chavez has taken over his body. We are so screwed.

hardcleareye's picture


"The government of the United States doesn't want peace. It wants to exploit its system of exploitation, of pillage, of hegemony through war."

"They say they want to impose a democratic model. But that's their democratic model. It's the false democracy of elites, and, I would say, a very original democracy that's imposed by weapons and bombs and firing weapons.

What a strange democracy. Aristotle might not recognize it or others who are at the root of democracy.

What type of democracy do you impose with marines and bombs?"

Please don't insult Chavez's memory by comparing him to Obama......  I just loved his "the devil was here" speech at the UN...   Big cajones... VERY BIG

My respect increased when he demanded the return of Venezuelan's 211 Tons of gold from the vaults of TPTB!!!

Tijuana Donkey Show's picture

Yes, bt then the CIA killed him with super-cancer. As for the gold......

Headbanger's picture

It's more like any number of states will secede and start the Second American Civil War which will last for 30 years or more that will obliterate the American Empire and leave the world in Dark Ages II, the sequel.

Seasmoke's picture

And gold is only $1320USD..... Ha !

Proofreder's picture

Annnnnd gold is at 1324, a few minutes later.  Ha Ha !

Got Popcorn ?  Rest of the week should be fun.

SheepDog-One's picture

Well obviously the only acceptable course of action is more debt right now, no one can possibly be placed under even a tiny bit of uncomfort, so warp drive those printers and 'fix it' again!

involuntarilybirthed's picture

Don't pay the interest to the Federal Reserve.  How much would that help?  They purchased treasuries with monopoly money anyway.  Probably less value than real monopoly money?

dcj98gst's picture

In a post-X Date environment, this operation (rollover) may not run as smoothly?  


Why? We are just as broke as before.  Gov. shut down and debt limit in place I would think would incentivise our creditors.


BTW ss long as TPTB are in charge, the FED can buy it, does anybody believe they are only doing 85B anymore?  

LawsofPhysics's picture

No worries.  If you thought ZIRP was good, NIRP will be even better!

SheepDog-One's picture

Chalky tha Prez says 'Markets need to see this as a crisis!' yet markets see it as a joke, any drop being pumped back up by close, or the next futures open.

Bam_Man's picture

It's a good thing the Japanese are printing money like crazy and desperately need to de-value the Yen. They will need to "step up to the plate" and start buying hand-over-fist. And soon.

Quantum Nucleonics's picture

This is a stupid article.  Running out of room to under the debt ceiling doesn't by itself create a default.  Maturing debt will get rolled over to new debt. (Sure, at a higher rate)  It's a wash in the debt ceiling calculation.  It's the need for new debt to meet current cash requirements that's the problem.

Obama and Democrats are complete morons.  All they need to do is commit to prioritize interest payments and they completly take away the leverage on the debt ceiling.  Then they would get to use the prospect of not sending social security checks to force capitulation.  Remember, monthly debt service for the US is about $20 billion, just 5% of outlays.

SDShack's picture

You're right on your point about Dumbcrats not understanding how they can take the leverage away from the debt ceiling fight by announcing the prioritization of debt payments first... but you miss the real reason why the Dumbcrats won't actually pull that trigger.  It's because that $20B or 5% of outlays comes from the non-defense budget which represents about 75% of the total budget. But more importantly for Dumbcrats, that non-defense portion of the budget supports about 100% of the Dumbcrat base. So the real solution will be for the Treasury to prioritize the debt payments first, then cut everything near and dear to the Repugs... starting with the Military. The problem with that solution, is that the the Dumbcrats agreed to fund the military before the shutdown. So Dumbcrat supporting Repug senators like Linda Grahm and Juan McCain, will balk at any attempt to cut the military now. So then the Dumbcrats will try to cut other pet funds to other Repub RINO senators, and they lose them. You see the Dumbcrats need the RINO Repugs in the Senate to try to make the Senate look reasonable and bipartisan in opposition to the "Wacko Tea Pary House". But Dumbcrats agreeing to ANY negotiations means either losing money that goes to their base, or alienating GOP RINOS in the Senate that they need to look "reasonable and bi-partisan. That's why the Dumbcrats have taken the "My way or the Highway" road and NOTHING will move them from it. They have trapped themselves on this road to nowhere and only the Repubs caving 100% can get them off of it.

ChanceIs's picture


I mentioned the following point of law earlier and would love to have someone corroborate or disabuse me of my misunderstanding:


1) The US Treasury can arbitrarily extend the maturity of US notes and bonds.  Ergo, for those there will be no rollover - just tough chit hombre - you will still get your periodic interest but forget about getting that principle when you expected it.  (For those who don't know - notes and bonds are longer duration instruments, greater than one year when issued I believe.  I think anything longer than ten years is a bond rather than a note.)

2) The Treasury must pay all bill (short term) principle at original maturity.

I remember this well from reading a prominent university professor discussing why when the SHTF, you want to be in the shortest duration possible.  Of course that was years before the concept of the "bail-in" was called into existence.  Again, I am quite sure of what I read.  I can't be sure that the professor was correct.  After all, Paul Krugman is a professor.

Karl Denninger has been off of his steed writing about how badly the presstitutes abuse the word, "default," and the 14th amendment.  I am sure he is correct:

The Debt Limit, The 14th Amendment, And The GOP

I would bet anybody here that the MSM hasn't a clue that the Treasury can just extend the maturity by dictat.  The only defaut will be if the interest isn't paid.  I am sure that Obama will find a way to ignore the Constitution on that if push comes to shove.  And why not, the US is still the prettiest horse at the glue factory.

Oh.  All this recalls to mind the great Jim Grant's recent quip:

"Owning US Treasuries is return free risk."

ForWhomTheTollBuilds's picture

I cannot help you but I will layer on another level of confusion. 


Can't the treasury call back bonds if they no longer like the terms?  Like if you bought a 30 year in 1982, and then 10 years later they don't want to pay that high an interest rate, can't they call back the bond and pay back the principle right then and there?  I'm pretty sure I read this was possible.


You gotta love the world of finance.  Its a goddamned carnival with all sorts of simple promises made among bright flashing lights and big noises.  "How can I lose?" you say to yourself.  "I'll but some 30 year treasuries, then Ill insure them with CDS contracts and then Ill buy some Comex gold futures in case things get really rough"


Not only do they fuck you up the ass on each and every one of those trades, but you find out after it's not even a "default" after the fact because of the small print that said you were never really buying anything.

ChanceIs's picture

What you are describing is a "callable bond," and are generally issued by corporations.  The issuer has to pay more interest on those than a non-callable bond.  If rates drop, the corporation just calls them and refis at a lower rate.  Quite often they are convertible, where the holder can convert the bond to stock at his discretion.  That helps the issuer get a lower rate.

Some bonds are puttable, where the holder can force the issuer to buy back the bond before maturity.  The issuer pays a lower rate for those.  This is not to be confused with the Greenspan/Bernanke put, where the Fed chair guarantees to all stockholders through the Plunge Protection Team that the DOW will never go below 10K - or should I say 14,900.  It is a little like the housing price put.  And both puts are free - being on the taxpayers' bill.

I am 100% sure that US government instruments are non-callable.

If Bernanke succeeds in creating inflation, I sure would want a put feature - and in gold as it used to be.

ForWhomTheTollBuilds's picture

Thanks for the info ChanceIs.


One minor benefit of Obama et al, screaming, "AMERICA WILL DEFAULT" at the top of their lungs is that those of us outside the finance arena suddenly get a deluge of exactly the kind of information we need to think critically about what is actually happening.


I wonder if any other nation in history has ever announced its own pending default and begged it's creditors to listen and act before its too late.

halfawake's picture

it should normally decrease confidence in being paid back, ultimately, but as you note, "..the US is still the prettiest horse at the glue factory."