Over $150 Billion Coming In Treasury Auctions

The US Treasury is ready to open the floodgates next week in its planned Treasury auctions.  This pertains to its T-Bills and to coupon maturity notes.  The total tab looks like it will come to more than $150 billion.

Earlier this week, the Treasury also noted that it would sell $8 billion worth of 5-Year TIPS.  The breakdown here for next week’s planned Treasury auctions is as follows:

• $29 billion in 3-month T-Bills;
• $28 billion in 6-month T-Bills;
• $40 billion in 2-year T-Notes;
• $35 billion in 5-year T-Notes;
• and $26 billion in 7-year T-Notes.

When you see how much debt is being issued and how much money will be coming into the system over the next few years from all the graduated stimulus packages, it becomes no shock at all as to why the FOMC keeps trying to stress a low interest rate environment for quite some time.  It makes Uncle Sam’s cost to borrow money cheaper.

If rates are going to stay low and if the government has any fear at all that its costs of borrowing could be much higher down the road (a thought noted by the esteemed Bill Gross and Julian Robertson), then Uncle Sam might as well issue more and more debt in the 10-year and 30-year maturities.  That would lock-in low borrowing rates for Uncle Sam for a decade or more.  It is at least a way of getting around an announcement that the printing presses for new cash are running around the clock.

The size here sounds astronomical.  Unfortunately, the notion of $30 billion and even $40 billion is becoming much more commonplace and $1 billion is just not what it used to be.

JON C. OGG