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

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.