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Posted in Liquidity Trader

Treasury Coming Up Short

by Steve Northwood

The Treasury is coming to market for an additional $5 billion in the 4 week auction ($26 billion vs $21 billion maturing). That flys against what was expected. They had been expected to pay down some on the 4 week and cover their needs with a shorter term Cash Management Bill (CMB). The problem is that they have needed to tap the markets for CMB’s and have to roll over some of them before the week is out.

So far this week, they will be net borrowers of $8.3 billion by net cash requirements of $11.3 billion on the 2 & 5 year auctions, $3 billion on the 3 & 6 month, and $5 billion on the 4 week, less an $11 billion paydown from a maturing CMB.

The problem is, that won’t cover the government’s needs. Not by a long shot. After all this activity settles, the Treasury will have about $20 billion in its checking account on Thursday evening.

Friday they will need around $30 billion to cover end of month bills. Expect another massive CMB announcement (15 day) tomorrow or possibly Wednesday probably for $20 billion to $25 billion.

That will likely be followed up next week with an additional CMB to pay down some on the weekly auction.

At that rate, they will likely spend much of the December 15th tax receipts on CMBs, and the paydowns we were expecting in December won’t be coming.

Steve Northwood is a private investor and trader. The views expressed are those of the writer only, and not necessarily those of The Wall Street Examiner, its publisher, editors, or staff. The purpose of this article is for education and information only, and should under no circumstances be construed as an invitation to purchase or sell securities. Neither the writer nor The Wall Street Examiner undertake to update this article. Readers are urged to consult with a qualified financial professional before making any investment decision.

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