The U.S. government is increasing the federal budget deficit, borrowing billions of dollars, and going deeper into debt. This is what happens when you slash taxes and refuse to cut spending.
To help cover its spending habits, the federal government will boost the size of its debt auctions over the next few months to raise more money. This comes as the Federal Reserve is also unwinding its $4.5 trillion balance sheet.
The Treasury Department said that the increase in auction sizes will take place until August and will consist of notes and bonds with 2-year floating rate notes and fixed-rate maturities between two and 30 years, Reuters reports.
According to the Treasury Department, the federal government will start selling 2-month Treasury bills later this year. Washington is also mulling over the sale of 5-year TIPSs securities that are tied to inflation rates.
More from Bloomberg:
The Treasury will sell $31 billion in three-year notes on May 8, versus $30 billion it sold last month and $26 billion in February, according to the statement released in Washington. The government increased to $25 billion the sale of 10-year notes, from $24 billion last quarter, and the 30-year bonds to $17 billion from $16 billion, also to be auctioned next week. The sales will raise new cash of $33.9 billion.
In the statement, the Treasury said it plans over the coming quarter to boost auction sizes of other maturities.
The department will notch higher sales of two- and three-year note auctions by $1 billion per month over the quarter, compared with monthly rises over the past quarter of $2 billion. It will also boost five-, seven-, 10-, and 30-year note sales by $1 billion starting in May and lift floating rate notes by $1 billion in May. The changes will result in an additional $27 billion of new issuance.
So, what’s going to happen to the bond market? Can there even be an appetite for all of this new debt? Aren’t investors worried about the deficit topping $1 trillion?
Treasury Secretary Steven Mnuchin isn’t concerned, telling the business news network:
“It’s a very large, robust market — it’s the most liquid market in the world, and there is a lot of supply,” he said in the interview. “But I think the market can easily handle it.”
Don’t worry. Kanye West’s newfound conservatism is more important…
Leave a Comment