Operating at the Intersection of Technology and the Capital Markets
Tag: fiscal debt
The 5-year Treasury yield is 4.62% and the 10-year Treasury yield is 4.56%. Yellen has flooded the market with new Treasury issues in order to replenish the TGA that she drew down from $1.7 Trillion in January 2021 to only $44 billion by June 2023. These new Treasury issues push yields higher. Once this forthcoming … Continue reading Treasury Yields Could Go Higher
Last week we wrote about upcoming Treasury auctions. You may ask "What does Treasury estimate as its borrowing requirements for the balance of the year?" After all, more borrowing equals more Treasury debt. Higher interest rates mean Treasury interest expense is growing as a percentage of Federal tax revenue, which will crowd out fiscal spending … Continue reading Treasury Debt Going Higher As Treasury Borrows
A week ago there was an 86.0% probability that the Fed would hold rates at its next FOMC meeting on September 20th. Today that probability is 78.5% as measured by the CME's FedWatch tool (HERE). Our view since the Fed's last FOMC meeting on July 26th has been that the Fed will hike rates by … Continue reading How The Fed’s September Rate Hike Will Play Out
Yields are moving higher, liquidity is leaving the system and asset values should fall. Over time, we believe that investors will focus less on Fed monetary policy and more on fiscal policy. Fiscal policy is the primary catalyst for U.S. economic activity (mostly bad), the Fed simply reacts. This week the Fed allowed $42.6 billion … Continue reading The Fed’s Balance Sheet Reduction (QT) Update
What's next is that this economic slowdown will become noticeably slower effective immediately. The catalyst is that Americans are responsible for paying down their student loans again beginning in October. Q3 consumer consumption will slow a bit as a result followed by a more pronounced slowdown in Q4. Consumer-facing Technology companies will feel a hit … Continue reading What’s Next and What’s Coming
The fact that the U.S. is technically insolvent is enough reason for fixed income investors to want a higher yield on 10-year Treasuries. However, even if you are more sanguine about the United States' financial position than I, you ought to want a higher 10-year Treasury yield. Since January 1990, the spread between the 10-year … Continue reading 10 Year Treasury Yields Will Move Higher
The fact that Fitch downgraded its U.S. credit rating from AAA to AA+ is a joke. Technically the United States is insolvent. We are running a $1.6 Trillion deficit fiscal year-to-date with 8 weeks remaining in fiscal 2023. We are able to run deficits year after year because the Dollar is a reserve currency and … Continue reading Fitch’s U.S. Credit Downgrade Is A Joke
Absent this Bank Term Funding Program bailout the U.S. banking system would be self-correcting at a much more rapid pace. This $2 Trillion bailout creates moral hazard in the same way that 13 years of QE did, which is to say that QE created an Executive class of Commercial Bankers who do not know how … Continue reading Weekly Update: Bank Term Funding Program
The equity market is too sanguine. Things feel too still. Could this be the calm before the storm, or, will another round of Fiscal stimulus and Fed easing abort the storm on the horizon, fiscal debt and inflation be damned? It is difficult to make a call on the fundamentals whether it be the price … Continue reading Nothing To See Here. Or Is There?
Washington politicians, Treasury officials and Federal Reserve bankers ought to think twice about further leveraging the U.S. Economy. Bailouts and Government subsidies are not the solution to building a robust free market economy (nor to winning elections). What do we have to show for the massive debt issuance that takes place each year? Moral hazard … Continue reading Diminishing Public Debt Returns
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