by Wolf Richter, Wolf Street:
While, for the first time, the Fed’s QT and refilling the government’s checking account (TGA) pull liquidity from the markets simultaneously.
So this is a special day: The U.S. national debt spiked by $851 billion since the debt ceiling was suspended a month ago on June 3, and now hit $32.32 trillion, according the Treasury Department on Friday evening. This is just an amazing freakshow:
TRUTH LIVES on at https://sgtreport.tv/
The US national debt is composed of two types of Treasury securities: “nonmarketable” Treasury securities that cannot be traded in the bond market; and marketable Treasury securities that the government sells via auctions to the public and that can be traded in the bond market.
“Nonmarketable” Treasury securities include the inflation-protected “I bonds” that Americans can buy directly from the Treasury Department. Government pension funds, the Social Security Trust Fund, etc. also invest in nonmarketable Treasury securities. The outstanding balance of nonmarketable Treasury securities rose by $123 billion since June 3, to $6.89 trillion.
“Marketable” Treasury securities spiked by $728 billion since June 3, to $25.43 trillion.
The Treasury Department has been selling vast amounts of Treasury bills and Cash Management bills (CMBs) since June 3, in addition to the long-scheduled issuance of Treasury notes (2 to 10-year maturities) and bonds (over 10 years), to refill its checking account. This “Treasury General Account” (TGA) at the New York Fed had been drawn down to just $23 billion by June 1, nearly nothing compared to the huge amounts that flow through that account on a daily basis.
The Treasury General Account has been partially refilled, from the low on June 1 of $23 billion to $465 billion on Friday, through a combination of this huge wave of new issuance of securities and the quarterly estimated tax payments that were due on June 15.
But wait a minute… For example, in 2022, the June 15 tax payments caused the TGA balance to jump by $140 billion. A month later, the balance was down by $200 billion. This year too, deficit spending will outstrip quarterly tax receipts by a wide margin.
In its Marketable Borrowing Estimates, released on May 1, the Treasury Department expected a TGA balance of $550 billion by the end of June. But Friday was the end of June, and the balance of the TGA was only $465 billion, thanks largely to lower tax receipts.
The Treasury estimated that the cash balance will increase in July, decline in August, and increase again in September (due to quarterly tax payments due on September 15), and by the end of September approach $600 billion, the level that is “consistent with Treasury’s cash balance policy.”
A wild ride of new issuance to get there… In the quarter starting July 1, so right now, the Treasury expected to borrow $733 billion in marketable securities to get to the $600 billion TGA balance by the end of September, assuming tax receipts don’t fall short again. That $733 billion flood of new issuance will start this week.
