Yields Surge After Treasury Boosts Auction Sizes More Than Expected, Sees Debt Issuance Tsunami On Deck
We gave a big picture preview of the debt flood (and fiscal crisis) that is coming to the US this past Monday when, looking at the latest Treasury debt estimates, we showed that the US predicted a near-record $1 trillion in debt sales in the current quarter (up from $$733BN forecast previously) and $852 billion in Oct-Dec quarter, numbers so staggering they are usually associated with economic crises...
but in this case a surge in debt issuance meant to sustain the illusion of the deficit-busting Bidenomics, which has managed to keep the US economy from imploding only thanks to massive new debt and deficit spending, or what BofA’s Michael Hartnett called “The Era Of Fiscal Excess”, something which Fitch finally realized last on Tuesday when it became only the second rating agency in history to downgrade the US AAA rating.
And while the endgame here is the first ever $1+ trillion in US interest payments which we expect will hit within the next 2 quarters...
The bigger than expected jump in issuance showcases the rising borrowing needs that contributed to Tuesday’s decision by Fitch Ratings to lower the sovereign US credit rating by one level, to AA+. Fitch said it expects US finances to deteriorate over the next three years, and that’s using old and outdated assumptions: the current reality is much worse.