Tag Archives: US Treasury Debt

Russia Dumped Most of its US Treasury Holdings, Disappeared from List, by Wolf Richter

Posted on July 18, 2018 | Leave a comment

Summit or no summit, Russia’s government doesn’t like US Treasury debt at this time. From Wolf Richter at wolfstreet.com:

Who stepped up to the plateIt’s a good thing Russia never held as many US Treasury securities as China and Japan. The scenario would have been different.

The “grand total” of US Treasury bonds, notes, and bills held by official foreign investors (central banks, governments, etc.) and non-official foreign investors rose by $44.6 billion to $6.17 trillion at the end of May, according to the Treasury Department’s TICdata released Tuesday afternoon. This is in the middle of the range of the past 12 months.

But Russia stands out by its sudden absence.

Russia was never a large holder of US Treasuries, compared to China and Japan. In March it was in 16th place with $96.1 billion in Treasury holdings. In April, it liquidated $47.4 billion of its holdings, and ended the month with $48.7 billion. That was down 69% from May 2013 ($153 billion). It knocked Russia into 22nd place behind the UAE and Thailand.

And it May, Russia liquidated more of its holdings and disappeared entirely from the TIC’s list of the 33 largest foreign holders of Treasuries. The smallest one on the list was Chile, with $30.2 billion. Russia’s holdings fell below that amount.

So we go to the TIC list of all countries that hold US Treasuries, and find that Russia’s holdings have plunged to $14.9 billion:

If there was a message in Russia’s liquidation of US Treasuries, it was a pitch in the water: The 10-year Treasury sell-off that had started last September peaked with the 10-year yield at 3.11% on May 17. Since then, the 10-year Treasury has rallied under heavy demand, and the yield has fallen – hence the handwringing about the inverted yield curve.

The largest holder of US Treasuries is China, a position it had lost briefly during its era of peak capital-flight from October 2016 through March 2017. Its holdings in May ticked up by $1.2 billion to $1.183 trillion. Its holdings have remained within the same range since August 2017, despite escalating threats of a “trade war.”

To continue reading: Russia Dumped Most of its US Treasury Holdings, Disappeared from List

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Who Will Buy Trillions Of US Treasuries??? by Chris Hamilton

Posted on February 22, 2018 | Leave a comment

The coming onslaught of US government debt will overwhelm the market. From Chris Hamilton at economica.com:

As of the latest Treasury update showing federal debt as of Wednesday, February 15…federal debt (red line below) jumped by an additional $50 billion from the previous day to $20.76 trillion.  This is an increase of $266 billion essentially since the most recent debt ceiling passage.  Of course, this isn’t helping the debt to GDP ratio (blue line below) at 105%.

But here’s the problem.  In order for the American economy to register growth, as measured by GDP (the annual change in total value of all goods produced and services provided in the US), that growth is now based solely upon the growth in federal debt.  Without the federal deficit spending, the economy would be shrinking.

The chart below shows the annual change in GDP minus the annual federal deficit incurred.  Since 2008, the annual deficit spending has been far greater than the economic activity that deficit spending has produced.  The net difference is shown below from 1950 through 2017…plus estimated through 2025 based on 2.5% average annual GDP growth and $1.2 trillion annual deficits.  It is not a pretty picture and it isn’t getting better.

Even if we assume an average of 3.5% GDP growth (that the US will not have a recession(s) over a 15 year period) and “only” $1 trillion annual deficits from 2018 through 2025, the US still continues to move backward indefinitely.

So, for America to appear as if it is moving forward, it has to go backward into greater debt?!?  If you weren’t troubled so far, here is where the stuff starts to hit the fan.

With the change to the Unified budget, effective as of 1969, the Social Security surplus was “unified” into the federal budget.  The government gave themselves a ready buyer for US debt while simultaneously allowing the SS surplus to be spent in “the present”.  Congressionally mandated to buy US debt, from 1970 to 2008, the Intra-Governmental Holdings (over half from the Social Security surplus) purchased over 45% of all federal debt issued.  This meant “only” 55% of US debt was auctioned into the market, or “marketable debt”.

To continue reading: Who Will Buy Trillions Of US Treasuries???

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Historic Market Test On Deck: Record $179BN In Treasurys For Sale Today, Quarter Trillion This Week, by Tyler Durden

Posted on February 20, 2018 | Leave a comment

The US Treasury will issue more debt this week than it’s ever issued in a week, and it’s only a four-day week! From Tyler Durden at zerohedge.com:

As noted earlier, bonds fell and the dollar rose as Wall Street turned its attention to today’s – and this week’s – record bond supply – which as Goldman explained over the weekend , is just the start as the US set offs on an “unsustainable” increase in debt, and which this week consists of an unprecedented amount of 4-Week, 3- and 6-Month Bill issuance, as well as 2, 5, 7 and FRN notes to boot.

Today’s selloff was driven by 2Y Treasuries which rose as high as 2.2436%, the highest level since just before the Lehman bankruptcy, while the eurodollar curve steepened too. Yields on 10Y bond rose to 2.93% earlier before fading half of the move.

Commenting on the sharp moves in yields, last week Jeff Gundlach noted that “UST 2 yr, 3 yr, 5 yr, 7 yr & now 10 yr yields all rising  >200 bp annual rate since 9/7/17. Faster than Fed hiking.”

As explained last night, the Treasury will sell 3-month bills worth $51 billion and 6-month bills for $45 billion, both unprecedented in their size, with a historic total of $179 billion in bills and notes for sale today:

  • 11:30am: U.S. to Sell $51BN 3-Month Bills
  • 11:30am: U.S. to Sell $45BN 6-Month Bills
  • 1pm: U.S. to Sell $55BN 4-Week Bills
  • 1pm: U.S. to Sell $28BN 2-Year Notes

In sum, total issuance this week is expected to hit a record$258 billion.

As Bloomberg observes, the glut in supply follows the passing of a two-year budget deal on Feb. 9 that raises government spending by nearly $300 billion. And, as Goldman and others have warned, investors will now brace themselves for a deluge of issuance over the coming months and years as President Donald Trump’s fiscal stimulus seeks trillions in debt to boost growth; if it fails US deficits are set to soar according to John Davies, a U.S. interest-rate strategist at Standard Chartered Plc.

To continue reading: Historic Market Test On Deck: Record $179BN In Treasurys For Sale Today, Quarter Trillion This Week

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Trump Or No Trump – Why The Next 8 Years Will Be The Worst Economic Period In US History, by Chris Hamilton

Posted on November 15, 2016 | Leave a comment

This next linked article is for those who like facts, logic (presumably most readers of a blog named Straight Line Logic) and graphs, lots of graphs. They illustrate a bleak future and point to an inevitable reckoning. Unfortunately, the graphs are not reproducible on SLL, but what they show is so important that the link has been posted below. Readers are urged to click it and see the article and graphs for themselves From Chris Hamilton at Economica blog via zerohedge.com:

Trump Or No Trump – Why The Next 8 Years Will Be The Worst Economic Period In US History

 

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