US Treasury Carpet Bombs Markets with $288 Billion This Week

The US Treasury will bomb the markets with $288 billion in new supply over the next 7 days.

This supply hits a market where structures are still collapsing and burning despite the Fed’s rescue programs. Those programs only exacerbate and prolong the causes of this disaster: Endless free credit, excessive leverage, complicated financial engineering, and infinite moral hazard.

How can anyone expect this not to end badly?

Here’s the Treasury supply schedule for last week and next.

Date	Security Type	Total Offering	Total Publicly	Net New Cash or
			Held Maturing	(Pay Down)
4/3/2020	Bills	$45,000	$0	$45,000
4/2/2020	Bills	$193,000	$80,035	$112,965
4/1/2020	Bills	$45,000	$0	$45,000
			April Running Total	$202,965
3/31/2020	Bills	$170,000	$93,517	$76,483
3/31/2020	Coupons	$125,000	$82,478	$42,522
3/27/2020	Coupons	$18,000	$0	$18,000
3/26/2020	Bills	$110,000	$105,888	$4,112
3/24/2020	Bills	$110,000	$88,992	$21,008
		Total Since March 24		$365,090

 

The Fed has been sending up $110 billion a day or so in anti-aircraft fire, but so far, the bombs are inflicting more damage than the Fed is preventing. The S&P has lost 45 points since last Wednesday.

That’s not all. The 13 week bill rate rose 12 basis points today. Other bills were stable, but the increase in the rate on this bill is a warning sign that the market will not be able to digest this barrage of paper without more dislocation, even with the Fed buying all of it and then some.

11 years of free money and QE built too much leverage into the system. As the bubble expanded it became increasingly fragile and brittle. It is still in the process of disintegration and collapse.

To better understand what the Fed and US Treasury’s actions ultimately mean for your investments and trading strategy, join me at Liquidity Trader. I’ll give you the lowdown there on what it means and how to position yourself to preserve your capital.