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

This is a syndicated repost courtesy of Confounded Interest - Online Course Notes For Financial Markets. To view original, click here. Reposted with permission.

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).

debtceiling

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.

tcashbal

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.

fedholdings

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.

 

 

Wall Street Examiner Disclosure: Lee Adler, The Wall Street Examiner reposts third party content with the permission of the publisher. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler, unless authored by me, under my byline. I curate posts here on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. Some of the content includes the original publisher's promotional messages. No endorsement of such content is either expressed or implied by posting the content. All items published here are matters of information and opinion, and are neither intended as, nor should you construe it as, individual investment advice. Do your own due diligence when considering the offerings of information providers, or considering any investment.

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