The U.S. government announced yesterday it will auction a record $104 billion in debt next week. Despite obvious warning signs that the world has had its fill of American paper, the Treasury will forge ahead: $40 billion in 2-years Tuesday, $37 billion in 5-year notes Wednesday and $27 billion in 7-year garbage on Thursday.
They must “get it.” Last week’s sharp rise in 10-year yields was as sure a sign as any that investors everywhere are getting cold feet. A prudent government would take a break… let things cool off. But there’s no rest for Uncle Sam, or his Treasury. They’ve got the mother of all Ponzi schemes to run:
The government chalked up a $189 billion budget deficit last month alone, another record and the eight-straight monthly deficit. We suspect they’d love to take a break from force-feeding the market notes and bonds, but they can’t… the Treasury will have to auction $2 trillion in debt this year just to keep the lights on.
(An interesting aside… funny how government savings started circling the bowl at the precise moment the gold standard was abandoned.)
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