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Pay Me My Money Down: US Debt Ceiling, Zero Treasury Yields and Kabuki Theater

This is a syndicated repost published with the permission of Confounded Interest - Online Course Notes For Financial Markets. To view original, click here. Opinions herein are not those of the Wall Street Examiner or Lee Adler. Reposting does not imply endorsement. The information presented is for educational or entertainment purposes and is not individual investment advice.

The US Federal government has hit its statutory debt ceiling. Interestingly, the Federal debt level has remained constant for a while (since the US hit the debt ceiling).


The US Treasury keeps a cash balance to make its debt payments … until Congress raises the debt ceiling (again) which Congress will do after some Kabuki theater.


Recently, Treasury ran low on cash (again) and decided to pay down the Federal debt … just enough to issue more debt and there will be another paydown this week since Treasury should run out of cash first week of November.

Of course, the biggest holder of US Treasuries is … The Federal Reserve, followed by China and Japan. They are all yelling “Pay me my money down!” to Treasury.


We may see a similar episode of zero Treasury bill yields until the Federal debt ceiling is raised. After the requisite Kabuki Theater, of course.

Here is a photo of Vichy Republican John Boehner leading the debt ceiling hearings before retirement.

kabuki boehner

*A tip of the hat to Lee Adler of The Wall Street Examiner for monitoring Treasury activities so closely.

Note from Lee Adler: Thanks to Professor Sanders for his kind mention. His post and a few others I had seen in recent days got me to jot down a few thoughts about this issue. It is one of the most forces most crucial to our understanding of markets.



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