The Fed is not tight enough.
Demand for $70Bn worth of 5-Year Notes yesterday (just another day of borrowing to finance Trump’s $40Tn and RAPIDLY climbing National Debt Bomb) had a bid-to-cover ratio of 2.21% – the lowest since 2018 with Indirect (foreign) Bidders taking just 54.3% – the lowest level since the Covid Disaster (also Trump) in March of 2020. Treasury had to offer an unexpected premium to convince buyers to absorb the supply – the Fed is no longer setting rates – the market has taken control!
Forget all the technical bullshit and focus on this: We are currently paying $1Tn in annual interest on our $40Tn in debt so that is 2.5% on average. Our debt has an average maturity of less than 5 years so, each year, we have to refinance over $7Tn AND Trump’s additional $2.5Tn (8% of GDP) additional deficit AND pay $1Tn in interest costs.
That, is our CURRENT situation but, as that debt rolls over at 5% borrowing rates, we now owe $1 TRILLION in additional annual interest which, in turn, adds $1 TRILLION more to our annual deficit, which will cause it to climb at $3.5Tn per year.
And that is BEFORE adding $500Bn in Department of War spending and BEFORE paying $1.3Tn to buy the Mid-Term Elections so, if Trump gets his way, we will be $50Tn in debt by the end of his term (assuming he leaves) and, at 5% – the interest ALONE on the debt will be $2,500,000,000,000 PER YEAR – up from $600Bn under Biden/Harris just two years ago.
That is the American Trump wants you to vote for in November – an America with foreclosure just around the corner!
If this were a stock, would you buy it? That’s essentially what Bond Holders are doing and the cost of insuring against US default is now over 0.5%, which causes the Bond Holders to demand 0.5% more interest to cover the bond and inflation, per yesterday’s PMI report, is now over 5%, which means a bond paying less than 5.5% is yielding NEGATIVE returns for people dumb enough to lend us money.
Scott Bessent is dumb enough to lend us money – he’s going to spend $6Bn today to shore up the $44Bn 7-year note auction this afternoon, which will also go off at over 5% – despite Bessent’s 13.6% Bid. This is just like a regular auction with the Treasury Secretary holding up a paddle for his own paper to generate fake excitement for our toxic paper…
IN PROGRESS
