This is hardly worth mentioning at this point as it’s become par for Bedminster now that the country is being run by the self-proclaimed “king of debt”, but I suppose I’ll go ahead and highlight it briefly.
Treasury was out with their Q4 refunding plan on Wednesday and to exactly nobody’s surprise, Steve Mnuchin is all set to steal the record from Tim Geithner.
Ol’ Steve will sell $83 billion in securities next week to refund more than $54 billion of privately-held Treasury notes and bonds, up from $78 billion last quarter and besting Geithner’s old refunding record of $81 billion. This is the fourth consecutive quarter the U.S. has boosted debt sales. Here’s the official breakdown:
WASHINGTON – The U.S. Department of the Treasury is offering $83 billion of Treasury securities to refund approximately $54.3 billion of privately-held Treasury notes and bonds maturing on November 15, 2018. This issuance will raise new cash of approximately $28.7 billion. The securities are:
- A 3-year note in the amount of $37 billion, maturing November 15, 2021;
- A 10-year note in the amount of $27 billion, maturing November 15, 2028; and
- A 30-year bond in the amount of $19 billion, maturing November 15, 2048.
This comes just weeks after news that Trump presided over the largest deficit since 2012 during his first year in office. The President is also the proud owner of the record for most interest paid in a single year.
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Not helping matters is the Fed’s balance sheet runoff, but it’s not as if that wasn’t telegraphed well in advance and assuming you think it isn’t a great idea for the central bank to participate in what amounts to a massive Ponzi scheme, balance sheet normalization is both necessary and desirable.
One might fairly argue – as the RBI’s Urjit Patel did in an Op-Ed for FT – that the Fed should calibrate the pace of balance sheet rundown to take account of increased Treasury issuance in the interest of avoiding a scenario where the deluge of supply and the dearth of demand from the Fed exacerbates the worsening global dollar liquidity squeeze, but ultimately, this is the fault of the administration.
Why? Well, because as we’re never going to get tired of reminding you, deficit-funded stimulus this late in the cycle (and when the unemployment rate is at a 48-year low) is insane and that inherent insanity is laid bare in the following chart:
(Bloomberg)
Geithner’s old record (mentioned above) was set when the U.S. was trying to claw its way out of the worst recession since the Great Depression. Trump is forcing Mnuchin to borrow on an even grander scale than Geithner, only with the economy hitting on all cylinders.
As Bloomberg reminds you, Trump “frequently criticized his Democratic predecessor for running up the budget deficit, and in 2012 recommended banning lawmakers from reelection if Congress couldn’t balance the budget.”
Of course now that he’s President it’s fine for the U.S. to mortgage its future, because after all, what better way to realize the #MAGA dream than putting ourselves in all kinds of debt?
As for whether folks will eventually demand more in terms of yields to fund this lunacy, you’re reminded that Mnuchin has continually insisted that he’s “got plenty of buyers”.
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One Bank Warns ‘Things Ain’t Like They Used To Be’ For U.S. Treasurys
In any event, nobody should worry, because even if the country goes bankrupt, Trump himself will figure out a way to “make a fortune” off this debt binge…
