Quiet 2 Year Bond Auction Adds $35 Billion To Total Debt, US Debt To GDP Now At 101%

Tyler Durden's picture


Today the US Treasury quietly and efficiently auctioned off enough debt to satisfy nearly 20% of the entire second Greek bailout funding needs (thank you repo markets and multi-trillion repo custodians BoNY and State Street). Tim Geithner just sold $32 billion in 2 year bonds at a rate of 0.31%, right on top of the When Issued, which was the highest yield since August 2011, yet nothing too dramatic. Since this is the short end of the curve where Bernanke is fully in control, the range in recent auctions has fluctuated from 0.222% to 0.31%. Yet as noted last week, the biggest "beneficiary" of short-end purchases have been Primary Dealers - are they starting to choke on thier holdings? And who will they sell to this paper which yields absolutely nothing. The auction internals were a snooze - the Bid To Cover was 3.54, a drop from January's 3.75, but higher than the TTM average of 3.42. Dealers took down 54.66%, in line with the average, Indirects left holding 35.84%, and 9.5% for the direct. Overall, nothing to write home about, and the bottom line is that the US just added another $32 billion to its net debt of $15.413 trillion, or a new record high debt/GDP ratio of 101%. It is going much higher.

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Tue, 02/21/2012 - 14:25 | 2181547 GeneMarchbanks
GeneMarchbanks's picture

Debt-to-GDP 101 Bitchez! Professor Geithner lecture time...

Tue, 02/21/2012 - 14:28 | 2181560 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Ugh, why are gold and silver going up?  It's speculative, it is a bubble, gold is at a high, you can't eat it, it pays no yield...why is it going up???

Tue, 02/21/2012 - 14:36 | 2181579 GeneMarchbanks
GeneMarchbanks's picture

... [crickets] Next question.

Tue, 02/21/2012 - 14:38 | 2181585 Conrad Murray
Conrad Murray's picture

The Doors - Been Down So Long - https://www.youtube.com/watch?v=DwMc0TjW_6Y

Tue, 02/21/2012 - 17:37 | 2182357 CompassionateFascist
CompassionateFascist's picture

Lies, big lies, and govt statistics. Trillions more debt at the mortgage agencies + chunk of GDP that is debt-financed govt spending = REAL US debt ratio is > 130% right now.

Wed, 02/22/2012 - 10:44 | 2184633 WeekendAtBernankes
WeekendAtBernankes's picture

Read Locke - Some Considerations of Interest

The "Of Raising Our Coin" section may help you wrap your head around it.

Tue, 02/21/2012 - 16:21 | 2181990 jekyll island
jekyll island's picture

And she's...gone.  Or should I say sayonara?  Fondly remember the time when Debt/GDP ratio was below 100%.  It won't be coming back again.  

Tue, 02/21/2012 - 14:24 | 2181549 oogs66
oogs66's picture

catching up to greece, when do we get our PSI?

Tue, 02/21/2012 - 14:24 | 2181552 Dr. Engali
Dr. Engali's picture

Who cares about debt to gdp when the gdp is whatever the ministry of truth tells it is?

Tue, 02/21/2012 - 14:28 | 2181562 rumblefish
rumblefish's picture

 I guess Obamas plan to slash the defecit in half in his first term is not going as planned.  or maybe it is.

Tue, 02/21/2012 - 14:28 | 2181563 rumblefish
rumblefish's picture

 I guess Obamas plan to slash the defecit in half in his first term is not going as planned.  or maybe it is.

Tue, 02/21/2012 - 14:29 | 2181565 Kaiser Sousa
Kaiser Sousa's picture

man r we winning or what...

off to my coin dealer.....

Tue, 02/21/2012 - 14:34 | 2181575 non_anon
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going for beyond broke

Tue, 02/21/2012 - 14:38 | 2181583 wavegenius
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The Top 5 Best and 5 Worst Elliott Wave Analysts in the world


Tue, 02/21/2012 - 14:40 | 2181587 Sophist Economicus
Sophist Economicus's picture

...are they starting to choke on thier holdings? And who will they sell to this paper which yields absolutely nothing...


No, they aren't choking.   They're gonna sell it to big Ben for a quick profit - with free leverage to boot....

Tue, 02/21/2012 - 14:44 | 2181591 bilbao
bilbao's picture

Enough of this pathetic bearish spin already. The Bid-to-Cover Ratio was: $123,925,002,800/$35,000,142,800 = 3.54:1

Primary Dealers tendered bids of $90,840,000,000 and only $19,036,102,500 was accepted.

Direct Bidders tendered bids of $14,135,000,000 and only $3,310,857,500 was accepted.

Indirect Biddered tendered bids of $18,782,409,000 and $12,485,589,000 was accepted. 

See for yourself: http://www.treasurydirect.gov/instit/annceresult/press/preanre/2012/R_20...

How many times a month does ZeroHedge have make it seem like the US is bankrupt when everyone who knows anything about Treasury auctions knows that Treasury auctions are designed no to fail. They are always over-subscribed by two or three times over due to the liquidity provided by government spending — targeted by Primary Dealers and the Fed.

Treasury auctions are just fiat reserve drains. They allow the Fed to target interest rates, and there is never a risk of Treasury auctions failing.


Tue, 02/21/2012 - 14:46 | 2181605 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

What the fuck are you talking about?

Tue, 02/21/2012 - 14:57 | 2181618 bilbao
bilbao's picture

This is how Treasury auctions work:



There is no risk of Treasury auctions failing. The reserves to purchase the bonds always exist in advance — otherwise, they wouldn't hold the auction in the first place.

Dollars come from debt. The dollars in your bank account either came from a bank loan (private debt) or from government spending (public debt). Bank loans must be backed by base reserves, which come from government spending (public debt). In other words, our entire money supply (except coins) comes from debt.

Since the US Treasury doesn't accept bank loans as a form of payment (it actually only accepts dollars from reserve accounts at the Fed) the funds to pay taxes and buy government securities come from government spending.

Tue, 02/21/2012 - 15:03 | 2181647 Mr Lennon Hendrix
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We're all here for the upper division class, and I think your 101 class is down the hall, Professor.

Tue, 02/21/2012 - 15:28 | 2181748 bilbao
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This is coming from someone who thinks that the Debt-to-GDP ratio means something for a fiat country.


Tue, 02/21/2012 - 15:05 | 2181659 hack3434
hack3434's picture

Let me guess...you subscribe to the MMT theory which is  why you believe you're spreading knowledge to us peasants. I think most people here understand the concept of money as debt and therein lies the issue. 

Tue, 02/21/2012 - 15:05 | 2181658 Vince Clortho
Vince Clortho's picture



And therein lies the problem.

Tue, 02/21/2012 - 15:22 | 2181724 bilbao
bilbao's picture

What exactly are you worried about? The US can issue an infinite amount of debt as long as inflation stays low. And there is little risk of inflation during a depression, while unemployment is so high.

The Debt-to-GDP ratio is irrelevant to a fiat country:


Tue, 02/21/2012 - 17:48 | 2182389 CompassionateFascist
CompassionateFascist's picture

You are mistaken. Current debt issuance is supported by status of dollar as world reserve currency (petrodollar), and that is in turn maintained by 11 US carrier battle groups. If Iran is not subdued quickly, game over.  

Tue, 02/21/2012 - 15:59 | 2181910 youngandhealthy
youngandhealthy's picture

Agree. "ordinary" banks are part of money creation but that seems to be beyond comprehension of some. Morons

Tue, 02/21/2012 - 14:44 | 2181597 Scottj88
Scottj88's picture

People still buy bonds?

Tue, 02/21/2012 - 23:38 | 2183292 Archon7
Archon7's picture

No, people buy other things... central banks buy bonds.

Tue, 02/21/2012 - 14:44 | 2181599 Mr Lennon Hendrix
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Everything is going according to plan or Bernanke, Geithner, and Co.  Indirects are staying short, while the Fed buys the long end, and the PDs pick up the slack where the indirects don't.  Who knows how long this will go?  So instead of guessing the timeframe, let;s look at the speedbumps.

Now that debt/GDP is negative/in the red/100%+/what have you, every auction and every dollar spent keeping rates down is going to have very minimal impact on achieving nominal growth.  The growth curve needs to keep a certain percent, and as the debt goes higher, the growth needs to match.  Of course, it isn't.

Is there anyway growth/debt can get beck to equilibrium?  Is there anyway there can be growth?  Considering the headwinds, I doubt it.  The solutions for the problems that the technocrats have put into place have caused more harm than good up until now.  Energy is getting extremely expensive.  The War Machine is beating the drums.

Yet Keynesian policy, yes the very liberal Keynesian policy, has said over and over that war is the health of the State.  Economics, the economics that Bernanke teaches through is publishing, says WWII helped grow the economy.  This is total hogwash, as it is the broken window fallacy more than anything, and just because you kill people and blow shit up destroys as much wealth as it creates.

No, the only hope, of course, as you know, is to get rid of this system.  There are people at the top of the power structure that not only do not deserve to be there (because of their idiocy) but put no work into the system.  People are always complaining about the Greeks lacking a work ethic, well, CEOs spend most of their time on the golf course, and many of them got their positions because of family connections and money.

The way to create a better economy means to get rid of everything we know about economics, and start over from square one.  Only then will we find a decent life for all of humanity.

Tue, 02/21/2012 - 15:31 | 2181769 bilbao
bilbao's picture

The US can never be insolvent (as we are fiat) and the debt-to-GDP ratio means nothing...



Tue, 02/21/2012 - 15:50 | 2181875 youngandhealthy
youngandhealthy's picture

B fucking S. Your time will come boy. This race to bottom will not end the way you seem to predict. Thats for sure. This 12 month "Euro is dead" talk is coming to an end an end that is not what has been predicted here at ZH I can tell ya.

Tue, 02/21/2012 - 14:50 | 2181612 Let The Wurlitz...
Let The Wurlitzer Play's picture

101%  Whooooo!! Hoooooo!!


Tue, 02/21/2012 - 14:56 | 2181627 NumberNone
NumberNone's picture

Come on Americans, it's time to 'Work, Work, Work'...can't let the Greeks outdo us!

Tue, 02/21/2012 - 14:57 | 2181632 lolmao500
lolmao500's picture

Seems to me the deficit is slowing from earlier in the fiscal year.

Tue, 02/21/2012 - 15:00 | 2181638 lolmao500
lolmao500's picture

And the official number for debt to GDP : 100.77%.

US GDP : 15.294 trillion Q4 2011
US debt : 15.413 trillion
Total debt to GDP ratio : 100.77%

Tue, 02/21/2012 - 15:06 | 2181663 Pairadimes
Pairadimes's picture

Long currency wheelbarrows.

Tue, 02/21/2012 - 15:31 | 2181771 taniquetil
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This is the first step towards stable recovery and future growth. More debt will cause unemployment to fall to 4.1% (which is basically full employment) and the Dow to go to 20,000 by the end of 2012.


-Paul Krugman

Tue, 02/21/2012 - 15:52 | 2181836 youngandhealthy
youngandhealthy's picture

US=Greece (diff 20%)


"...the last time the debt topped the size of its annual economy was in 1947 during World War II, according to AFP. But the deficit at the time was driven by war spending -- a degree of spending that ebbed once the war ended..."

Que? Two wars  has been going on since 2001. There you have it. Bush JR problem. AFP must be asleep at the helm.

Tue, 02/21/2012 - 15:43 | 2181843 HungrySeagull
HungrySeagull's picture

Today is Mass Intake day for those with Utility Shutoff Notices in hand.

Or until funds are depleted. (Which they will be in the land of 500 dollar a month juice bills and whatever overages)

Why are these goddamn auctions being held and for whom?

38 Bil divided by 50 states will certainly keep the good people warm. After all they endured much.

Tue, 02/21/2012 - 16:03 | 2181924 Martin W
Martin W's picture

milion, bilion, trillion what is next? Sex - tillion?

Tue, 02/21/2012 - 23:33 | 2183282 Archon7
Archon7's picture

kabillion, then zillion

Tue, 02/21/2012 - 16:11 | 2181948 dracos_ghost
dracos_ghost's picture

Phew, I didn't think we'd ever get there.

Tue, 02/21/2012 - 23:36 | 2183286 Archon7
Archon7's picture

101% was a good thing for my old football coach - he expected nothing less.  I'm glad to see our government's giving it all they got.

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