Monthly Archives: April 2013

Paying Down the Debt

Last year the US Gov. borrowed 173B in Q2. The estimate for this year was roughly 103B. Yesterday, thanks to increased taxes and sequestered spending, the Treasury said it would PAY DOWN 35B in debt from April to June. The first pay down since 2007,many in the game are unfamiliar with the activity. Several consequences jump out at us:
The present default position of the Fed's LSAP has increased, or they need to TAPER a bit to maintain their present percentage of issuance take up. Market participants-some who vocally espoused the view-have not equated the rapidly falling deficit (and now slightly lower debt) with the robust index prices. We argued during the faux Deficit/Fiscal Cliff crisis that merely changing the direction of the trend and growing the economy (even at this slow pace) would be plenty for capital markets. It has been, but we now run the risk that private sector borrowing is not ready to make up the fall. On a practical level the paydown means TAXES are too high. What will be heralded as the fruits of a "balanced approach" is, in reality, the evidence of over-striding.
All of this plays into the debunking of Rein/Rog and the grass roots upheavals against austerity in other countries. As @groditi and I discussed yesterday the collateral shortage "story" will continue to bob around like Ben Gardner's head. The good news remains essentially locked in the capital markets and very little leaks to the general economy. QE, as we have said before, is the Neutron Bomb of monetary policy-the assets are fine, the people are toast. We turn our calenders to May tomorrow.

Sidebar: Sallie Mae had to pull a 3.5% issue (225m) for lack of demand. That's a failed auction in the largest public debt pool.

Classical Tuesday

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On the economic calendar:-
07:45 ICSC-Goldman Store Sales
08:30 Employment Cost Index (Consensus 0.5% v Prior 0.5%)
08:55 Redbook
09:00 Case-Shiller HPI (Consensus 1.0% v Prior 1.0%)
09:45 Chicago PMI (Consensus 52.4 v Prior 52.4)
10:00 Consumer Confidence (Consensus 62.0 v Prior 59.7)
          State Street Investor Confidence Index
11:30 4 Week Bill Auction
          52 Week Bill Auction
15:00 Farm Prices
10:15-11:00 Outright Treasury Coupon Purchases up to $5.25 billion

Classical Monday


On the economic calendar:-

08:30 Personal Income and Outlays
10:00 Pending Home Sales Index (Consensus 0.7% v Prior -0.4%)
10:30 Dallas Fed Manufacturing Survey (Consensus 5.0 v Prior 7.4)
11:00 4 Week Bill Announcement
11:30 3 Month Bill Auction
6 Month Bill Auction


10:15 - 11:00 Outright Treasury Coupon Purchases up to $1.75 billion