Welcome to the New Reality of Leaping U.S. Treasury Debt Sales
We have been watching the bond market closely especially since the 10 year broke above 2.6%. This all comes at the start of 2018 which is a year that we will see a pickup in central banks stepping out of the markets. This will take the largest buyer out of the bond market (yes this will be gradual). A demand side consideration.
Now we have this story about the US Treasury about to announce a larger note sale for the first time since 2009. This makes perfect sense if we step back an understand what is happening in terms of the finances in the country. Trump is a debt guy and will use increased debt to move infrastructure and economic growth along. Even with the new tax plan that he is hopping will increase economic growth there is expected to be a short fall in terms of money coming in. All this will lead to more debt and in turn the issuance of more bonds.
This year is going to be very interesting for the bond market. If the central banks continue to stay the course and increase rates and unwind QE programs around the world where are all the buyers for these bonds going to come from?
Have a read below and please share your thoughts…
Click here for the original posting over at Bloomberg.
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Issuance seen more than doubling to exceed $1 trillion in 2018
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Announcement on bigger coupon-bearing sales expected Jan. 31
The world’s biggest bond market is about to get a taste of the future, with the U.S. Treasury expected to unveil bigger note sales for the first time since 2009 to fund budget deficits that are likely to deteriorate for years to come.
Treasury Secretary Steven Mnuchin’s debt-management squad is scheduled to announce on Jan. 31 how it plans to finance the government’s shortfall over the next three months, and Wall Street prognosticators anticipate bigger auctions of coupon-bearing securities. Dealers forecast an onslaught of debt supply that will lead issuance to at least double this year to more than $1 trillion, the most since 2010, starting with sales of short- to medium-term maturities.
The catch is that buyers may struggle to keep up: Central banks are showing signs of stepping back, and other investors may want to see higher yields before pouncing. That backdrop also contributes to forecasts for a flatter yield curve in 2018, given expectations that the Federal Reserve will hike rates further as inflation picks up.
Ballooning Burden
Source: Congressional Budget Office
“There will always be demand, but the question is just at what price,” said Torsten Slok, chief international economist at Deutsche Bank AG. “It’s fair to say the reason why the consensus is for Treasury yields to move higher is because of this growth in supply.”
The latest projections from analysts show where that clearing price may be. Forecasters see 10-year yields reaching 2.9 percent by year-end, from about 2.6 percent now. Yields have already climbed more than a half-percentage point since early September, to the highest since 2014.
America was already on course to go deeper into the red to pay for rising Social Security and Medicare expenses and mounting interest costs on its debt. That trend got added fuel from the tax overhaul passed last month. Treasury also faces more borrowing as the Fed steps up its balance-sheet runoff.
‘Unmistakable’ Path
While President Donald Trump’s administration says the tax bill will stimulate enough economic growth to cover lost revenue, Congress’s tax scorekeeper estimates the changes will raise deficits by more than $1 trillion over the next decade.
“We were on an unmistakable upward trajectory to begin with,” and the tax laws compounded it, said Douglas Holtz-Eakin, president of American Action Forum in Washington and former chief economist to the Council of Economic Advisers under George W. Bush.
The U.S. posted its largest budget deficit since 2013 in the fiscal year that ended in September. Even before the tax rewrite, the Congressional Budget Office forecast that the public debt would increase by more than $10 trillion by 2027.
JPMorgan Chase & Co. strategists this month lifted their forecast for net new Treasury issuance in 2018 by about $100 billion, to around $1.42 trillion, after the passage of the tax bill. Net sales in 2017 totaled about $550 billion.
Treasury’s Signal
“Supply is going to be a factor to watch and monitor very closely,” said Dan Heckman, a Kansas City-based fixed-income strategist at U.S. Bank Wealth Management, which oversees $151 billion. He expects 10-year yields to reach from 2.75 percent to 3 percent in December.
“There are so many different forces going on now” that will cause a “gradual climb in rates,” he said.
The Treasury said in November that it anticipated increasing coupon auctions this quarter. It would be the first boost to note or bond sales since November 2009. The Jan. 31 announcement will include specifics on the following week’s offerings of 3-, 10- and 30-year maturities. But dealers also expect guidance on other tenors, with details to be unveiled in February.
A big chunk of the new supply is expected to come through bills, as soon as lawmakers hoist or suspend the debt limit again. New bill issuance could tally $300 billion to $600 billion in the coming year, judging by analysts’ predictions. The remainder of the increase would come through coupon auctions.
Flattening Fuel
Many dealers expect Treasury to start increasing offerings in maturities up to five years, before moving to longer tenors. That could magnify a dominant trend in the bond market, the shrinking spread between short- and long-term yields that’s flattened the curve to levels last seen a decade ago.
Jefferies LLC and Societe Generale SA forecast 2-, 3- and 5-year auction increases over the quarter. TD Securities sees more 3-, 10-, 30-year debt and floating-rate notes. Morgan Stanley predicts Treasury will lift various maturities quarterly in 2018.
In November, the most recent quarterly refunding, the government announced sales that month of $24 billion of 3-year debt, $23 billion of 10-year notes and $15 billion of 30-year bonds. The Treasury sells additional amounts of these securities in other months. It plans to sell $26 billion of 2-year debt, $34 billion of 5-year and $28 billion of 7-year notes this week.
Below is a quarterly snapshot of how SocGen sees nominal coupon auction sizes evolving:
| Maturity | 2-year | 3-year | 5-year | 7-year | 10-year | 30-year |
| February | $28b | $26b | $35b | $28b | $23b | $15b |
| May | $32b | $28b | $38b | $29b | $24b | $16b |
| August | $34b | $30b | $40b | $32b | $25b | $16b |
| November | $34b | $30b | $40b | $34b | $26b | $16b |
The deluge, combined with the potential of diminished central-bank purchases just as multinational companies may lighten up as well, spells trouble, said Jason Brady, president of Thornburg Investment Management.
“You have all these things pointing in the same direction,” said Brady, whose firm in Santa Fe, New Mexico, oversees $52 billion. For bond investors, “this environment is just not great.”
— With assistance by Chris Middleton
Above is……Greg Mannorino…
GREG……….said Watch the BOND MARKET……..
https://www.zerohedge.com/news/2018-01-24/ray-dalio-says-bear-market-has-begun-expects-historic-crash
Scott Trade and TD…..joining forces……, must mean not enough business for both..jmo
Jerry, who do you use for online trading? (Or off-line for that matter.)
….looks like now, I will only be trading with TD…I had both accounts TD & Scott.
What’s the TD stand for? And what’s an Ameritrade? (Kind of like an Ameroconned?) 🙂
As you know, TD Ameritrade acquired Scottrade and TD Bank, N.A. acquired Scottrade Bank. Since then, we’ve been working together to ensure a smooth and easy transition for you, while keeping you informed and up-to-date on any changes that impact your Scottrade Bank account(s).
Good question…..sounds like an Amero…….TD, might mean Trickle Down …. 🙂
Summary for those who missed it…….
https://www.sgtreport.com/articles/2018/1/23/treason-qanon-exposes-obamahillary-16-year-coup-dtat-plan
he Obama/Hillary 16-year coup d’état plan
QAnon makes clear Obama, Clintons, DNC, and the U.S. intelligence community planned their coup d’état boldly, confident Hillary Clinton would be elected president, never imagining Donald Trump would win.
The Obama/Hillary Clinton “16-year plan to destroy America” involved the Democrats calculating both Obama and Hillary Clinton’s two term presidencies would allow the unfolding of a 16-year plan to destroy America.
As part of the plan, the Democratic Party co-conspirators envisioned Hillary would follow Obama’s plan to put rogue political operatives at key positions throughout the federal government, just as President Obama placed John Brennan at CIA; James Clapper, DNI; Eric Holder and Loretta Lynch as Attorney General; Valerie Jarrett in White House, James Comey at FBI – the list goes on.
Hillary would continue Obama’s plan to weaken the U.S. military, while actively funding Iran and North Korea’s development of nuclear weapons.
The only military commanders promoted by the Obama and planned Hillary Clinton administrations were to be those who: accepted the LGBT agenda and sex-change operations for transgender soldiers at taxpayer expense, were willing to eliminate any discussion of radical Muslims as terrorists, accepted a nuclear-armed Iran and North Korea, were willing to advance the Palestinian agenda to destroy Israel as a Jewish state, were willing to promote Muslim Brotherhood control throughout the Middle East and Africa.
An American nightmare under President Hillary Clinton
QAnon predicted that Hillary would use her 8 years as president to cause World War III – a war that would cause death and destruction on a massive, never-before-imagined scale of horror.
The war would be a “fake war” promoted by the government-controlled MSM. Billions of the world’s populations would be killed off, allowing the globalists (including Hillary, Obama, Podesta, and their co-conspirator minions) to pocket huge wealth on a global scale.
When the Obama/Hillary 16 years in the presidency were completed, the U.S. middle class would be destroyed. The U.S. population (what was left of it) would be reduced to a status of enslavement, starvation, death, and disease.
When the Obama/Hillary 16 years in the presidency were completed, the U.S. would have no borders, the Constitution would be revised to remove the Bill of Rights and all fundamental U.S. freedoms, and the population would be disarmed by the repeal of the Second Amendment.
When the Obama/Hillary 16 years in the presidency were completed, there would be no electoral college.
Future presidents would be elected by a majority of the popular vote, giving control to large states like California, New York, and New Jersey that can easily be overrun with illegal immigrants voting for the traitors and their anti-American conspiracy.
If illegal votes were not enough to make sure the Democratic Party traitors dominated all elections, George Soros would be allowed to install voting machines to make Democratic Party voter fraud easy to achieve electronically.
When the Obama/Hillary 16 years in the presidency were completed, the U.S. military would comprise a very small percentage of the U.S. budget, with transfer payments making sure excessive taxation redistributed income to minorities and illegals sure to vote for the Democratic Party traitors.
U.S. military bases would be closed worldwide, beginning in Germany. Russia, China, and rogue states including Iran and North Korea would no longer need fear U.S. military reprisals for their evil expansion.
Only “Project Mockingbird” PRAVDA-like mainstream media willing to be controlled by the CIA to disseminate the Obama/Hillary traitors’ anti-American ideology would be allowed to survive.
All other news would be censored, with Google, Facebook, Twitter, and other Internet giants unleashed to eliminate from “Social Media” even the most private or coded communications patriots might attempt.
Read More @ Infowars.com
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Corruption, Deep State, News, NWO Tyranny
TREASON: QANON EXPOSES OBAMA/HILLARY 16-YEAR COUP D’ÉTAT PLAN
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The Market Underestimates The …
Former CIA Robert David Steele, …
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Hey Jerry, now that all this stuff is coming out regarding the Comey Chameleon corruption, FBI and other deep state characters tricks with Hillary, Obammy, etc. wouldn’t this just be the time for this fractured reserve based economic ponzi scheme to collapse? Not saying it will happen tomorrow but maybe within a year or so. That would take attention off the corruption and at the same time make Trump the fall guy for the economic discontent that would ensue just like Peter Who says…
And Peter managed to wear a tie that matched the Euro Pack colors in the background… 🙂
Anyway, if the fractured reserve based economic ponzi scheme deosn’t happen in the near future maybe some incident to cause a war will…anything to take the heat off the Deep State criminals, Hillary, Obammy, etc.
I think the central banks are going to be around for awhile………
The clinton are going to be thrown under the bus, along with the others.
The House of Roth, has been around a long time, this is just blip on the screen.
Haha, that Peter Schiff…
The general market will have a good drop. The real economy is going to have a moonshot blast off. The real economy and stock exchange are two different things. As seen in the last several (fiat currency) years.
Stevie at the treasury does controll the ESF. And Donald will take the glory. And when the market does crash, he will blame it on fake news, which will take down the mocking bird fake news. ( he’s actually that brilliant )
On another note:
If Hitlery, Jeb, et al were elected, you would never see the truth coming out about the DOJ and FBI. And that’s just the start.
Peter who? 🙂
Peter is yesterday’s mashed potatoes……
Peter was so smart that he told everyone to leave the US, and he was so smart he went to PR…..and now he lives in a slum area………..no electric and a bankrupt village……. 🙂
I’m sure Peter Mashed Potatoes 🙂 got through the hurricane fine. I’m sure he’s got generators and everything else he’d need to get through that. (He didn’t say much about the hurricane on his podcasts although there may have been one I missed that he might have said something.) But his employees may be another case. He has an estate in some kind of gated community that is like a small city/fortress but most of his employees live elsewhere on the island and I’d bet they didn’t fare as well.
Talk about wishful thinking:
“The real economy is going to have a moonshot blast off.”
& “And when the market does crash, he will blame it on fake news, which will take down the mocking bird fake news.”
— — —
I don’t quite share Peter’s level of bearishness but a bear market is coming and it will have significant negative impact on the economy — which is not nearly as strong as many “experts” claim.
And to think the debt situation is far worse than 08…and the “too big to fail” criminal entities are now “much too big to fail.” And derivatives…well, let’s not go there. Imagine what the implosion will be like.
So you don’t think the tax cuts and deregulation coupled with infrastructure spending will be a major economic boom?
Trumpy’s trillion dollars of pork fest? That’s gonna cause a hell of a hang over when it’s piled on the crack the Feral Reserve has already dished out.
Tax cuts and deregulation are positives but aren’t enough. Infrastructure spending is not only a net negative but such wealth transfers are wrong.
It’s pitiful that the modern “conservative” doesn’t have a problem with such a Keynesian/”FDR” approach.
Speaking of fake conservatives, I doubt that one in twenty republicans knows what’s wrong with the actions discussed here:
https://www.youtube.com/watch?v=iRzr1QU6K1o
I agree Chartster, but evaluations are so high that that is already built in to the stock market. The debt [problem may suddenly hit home as interest rates and inflation grows.
Welcome to the New Reality of Leaping U.S. Treasury Debt Sales
And just who’s gonna buy the fish (and rotten fish at that) that Munchkin will be peddling???
With the Chinese and Japanese saying no mas….who will pick up the slack??? The Fed.
Here is the 99 page document upon which the 4 page FISA memo is based:
https://www.dni.gov/files/documents/icotr/51117/2016_Cert_FISC_Memo_Opin_Order_Apr_2017.pdf
CFS, ever thought of putting up a Web site to archive all you find and your commentary?
Kind of like what the woman who owns this site has done: http://asheepnomore.net
US Dollar currently at $89.86 and sinking.
Unfortunately for those that thought the greenback would hold at support at 92 and trade in a range between 92-98 were sadly mistaken.
Like Mish Shadlock?
I don’t follow Mish Shedlock, but I believe Mr. T and he are good friends. Is that what Mish was projecting?
> On August 20, 2017 at 6:09 pm,
Excelsior says:
“We need a fresh catalyst I feel.”
“If the US dollar fell out of bed down through 92 and into the high 80’s would that do the trick?”
-> On October 17, 2017 at 6:52 pm,
Excelsior says:
“At this point it is looking like Gold and Silver have more work to do, but I can’t help pondering what we discussed back in August — That if the US Dollar cannot mount an impressive reversal higher, and instead just pauses here and rolls over, then that might be the very “catalyst” that the metals and commodities need. Cory mentioned in the interview above that the Dollar really hasn’t shown any meaningful strength after starting to rebound.”
“If the Dollar rally fizzles from here and breaks back down below 91-92, then it could be a surprise that catches most traders off-sides.”
US Dollar – 89.63
Gold – $1351.70
Silver – $17.28
Oil – $64.73
Inflation – rumble rumble….
Rumble , rumble…….are you sure that is not your stomach, calling you to breakfast… 🙂
A valid point OOTB 🙂
Time to make some breakfast before the main trading session opens up. Yum!
Gold going higher………………..
I THINK THE TURN HAS Arrived……….
The turn arrived in the PMs on Dec 13th (the same day the FED raised rates).
This is why I mentioned for months before it happened that it would be wise to build up some dry powder to deploy before the rate hike, as the metals has surged after every single previous hike starting in Dec of 2015 until present. Other commentators were warning of waterfall declines, that we were still in a bear market, and new lows for metals and miners. Just sayin’…..
has = have
For those that weren’t worried about waterfall declines and the metals plumbing new lows at the end of last year, most of the other ones thought that the metals price rise on the 13th & 14th were just “knee-jerk reactions” to the rate hike and would likely reverse back down rather quickly.
Most commentators (including many of the ones on this site) were either bearish on the metals for the short to medium term, or some were just dismissive that there was no fundamental drivers for the metals to rise or for the dollar to drop out of its range.
There were obviously a few technicians and commentators here on the blog (like Matthew, GH, and Wolfster) that could see the dollar sell down was more likely, but I’m just saying in general, very few on any financial sites or forums were discussing loading up on PMs in mid December.
Instead, we have had one of the strongest rallies in Gold since 2016, and a dollar that broke it support and has headed into the high 80’s.
Once again, it is lonely at the bottom during turns, and most investors can’t make the transition because they suffer from recency bias and can’t see things changing when the time has come. Their negative sentiment often clouds their logic circuits.
To their credit Brien Lundin, David Erflie, and Michael Belkin were saying to load up near the rate hikes and at the end of tax loss selling for the inevitable rally post rate hike. I’m sure there may have been a few more, but the number of investors getting positioned right before the FED hikes were very few and far between.
The bull shakes off as many riders as possible on the way up…..
The Fed has be jaw boning for 10 yrs…….
I am not sure that was the Bell ringing that Loud….
That was not the first rate hike, if memory serves me correctly.
The BIGGER NEWS is……Muchy, calling for a Weaker DOLLAR…..IMHO…. 🙂
Regardless…….let us hope it is going to the MOON…..lol
POLICY CHANGE, in the Treasury…….Next will be in FEB…when NEW FED CHAIR arrives.
The NEW FED chair…..will be a business person instead of Theory Harvard moron…
OOTB Munchy’s babble had nothing to do with any of this.
No, it wasn’t the first rate hike, but each Fed rate hike has been succeeded by a surge in the metals, and when they come in December at the end of tax loss selling they are followed by rallies. That pattern has played out 3 years in a row now. (ding, ding, ding).
The Fed hike in 8 years was in Dec of 2015 and there was an initial dip when it happend for a week or so, but then it kicked off the most epic surge in PMs starting in late December and into the first half of 2016. It was the catalyst.
In December of 2016 – same pattern, only the reaction was quicker moving out of late Dec and into the “Q1 Run” into early 2017.
There was a fed hike mid 2017 that had an even faster reaction, although the rise was more muted and shorter.
It was the clear move to position at the end of tax loss selling in Dec, near the Fed rate hike, because we’ve seen this film before.
Sure enough, the hike happened, and Kablam…… the rally started that very day this time and hasn’t let up since. Now the weaker dollar is fueling it further.
Munchy wasn’t involved in any of those, but the fedbabble was present each time.
There has also been a “Q1Run” coming out of December and into Jan/Feb in 2015, 2016, 2017, and 2018.
Yes, there are people that love to dismiss seasonality, but it is hard to argue with the undeniable fact we’ve had a rally in the PMs at this time of year 4 years in a row.
OOTB Munchy’s babble had nothing to do with any of this……You say…
When the Treasury says , they want a policy change……that has a lot to do with any investments…..ie, weak dollar down, gold goes up….according to the experts.
Point No. 2…….there has been no confirmation in these sideways moments for the last couple of years……according to Flannigan…Gann’s report …Yesterday…..
The confirmation would have the HUI….come in around 160……from what he indicated.
OTTB – I agree that Muchy’s statement of wanting the dollar to be weaker is significant, but is not why gold rallied the last few Q1Runs.
Gold was rallying in previous years due to the seasonality of coming out of tax loss selling, and then the Fed hiking of rates the last 3 Decembers have also been a consistent trigger. The weaker dollar hitting new lows is just adding fuel to that fire.
If Munchy had never opened his mouth, this same exact pattern would still have played out.
Here’s a good talk from last weekend from Brien Lundin that illustrates these points well:
>> Brien Lundin “Gold:Following The Plan…So Far”
January 2018, Metals Investor Forum: #VIDEO
Btw……..I was not even mentioning seasonality…….which is very valid point if you are playing the miners….but, seasonality,is a secondary issue (imo), in a major bull market, and a major turning point is what everyone has been looking for….maybe, not everyone, but, being around here for 15 yrs…..I would call the Muchy announcement HUGE…. 🙂
A TURNING POINT……just like the “Great Awakening” in Politics…….
I was writing , while you were posting……..great minds think alike…… 🙂
I have to say one last thing……concerning the past rallies……..and you know this,
each time the rallies hit the high, they were driven back down, …..I think this time is different…..we will see if gold can blow thru….$1440…or 1479…
Yes, it is a turning point. I felt that the lip service this administration has given to wanting a weaker dollar a definite shift in sentiment. Their thinking is that it will stimulate demand for US products at the same time they are slapping import tariffs on Chinese good to raise their prices.
I’m not convinced this will work, as the US doesn’t make low cost exportable goods that the world craves. The US excels in online social network sites, and online search engines, and online stores, but there isn’t a big world out their clamoring to buy “made in America” products.
As a result, the Chinese will just sell their cheap goods to other countries that have appreciating currencies, while the dollar falls.
Also, as the dollar falls, it stokes inflation, which will help the metals and commodity sectors this year, but it will punish consumers when they buy things. Prices will go up and their dollars will buy less. I’m not sure how that is a win for anyone.
The giant debt load the US carries (which is totally unable to be paid off at this point), hurts our dollar perception on the global stage, and thus inflation become the silent tax robbing citizens purchasing power. It is the result of fiscal mismanagement, and all the tax cuts in the world aren’t going to solve the spending problem. Only spending cuts can solve that, and no administration wants to really get out the ax and start hacking away at the bloated size of the government, the insane number of departments & the workers that a mostly unnecessary, nor deal with cutting the spending on entitlement programs, social programs.
It will be interesting to see if this dollar weakness in the midst of a seasonally strong period of time will be the impetus that gives gold enough juice to get above the 2017 high of $1362, and much more importantly the 2016 high of $1377 on this rally.
If not, I have little doubt that we’ll break those 2 prior peaks later in the year.
If/When those levels are taken out, it will put to rest the silly notion from some PM bears that the PMs are still in their bear market once and for good. Cheers!
Kitco is reading our blog……….. 🙂
http://www.kitco.com/news/2018-01-24/Gold-Silver-Prices-Pop-On-Big-U-S-Dollar-Drop.html
That’s fine. We read theirs. 🙂
(DV) DOLLY VARDEN – RECAP OF THE SUCCESSFUL SILVER DISCOVERIES OF 2017
Bond trouble ……….gold hedge on inflation , trade maybe?
https://www.zerohedge.com/news/2018-01-23/warning-financial-system-just-made-tectonic-shift
This is an absolute game-changer.
Makes me think of that article posted a little while back that asked:
“Is this IT?”
On that note, the yield on the most important bond in the world: the 10-Year Treasury, has already broken above its 20-year trendline.
The US is not alone… the yield on 10-Year German Bunds has also broken its downtrend.
https://www.youtube.com/watch?time_continue=7&v=At21eNAekUY