By Cory
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.
Issuance seen more than doubling to exceed $1 trillion in 2018
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 …read more
Source:: The Korelin Economics Report
The post Cory’s Insights – Tue 23 Jan, 2018 appeared first on Junior Mining Analyst.