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Treasury bonds issuance and the U.S. deficit

The US Treasury needs to finance the (huge) budget deficit the goverment is running. So far, they have been able to do it with #treasurybills, where they typically maintain a 15% -20% cap on the total debt in a way they don’t put too much pressure on the long end of the curve. However, issuance of long bonds will need to go up, in fact it’s been decided by #tbac (Treasury Borrowing Advisory Committee) monthly T-bond issuance will increase 60% by August 2024 ($220bn in July ‘23 vs $340bn expected), as you can see in the chart below. But that’s just one side of the equation, the supply side. On the demand side, the #federalreserve is a net seller of bonds through its #qt program, and #banks are not in a position to buy bonds in a meaningful way. #japan is too busy keeping its 10 year from going too high with its #ycc program and #china is busy trying to jump start its economic activity. Then, the big question is: who wil buy US treasuries, and at what yield?


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