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Treasury Auctions To Take US Over Debt Ceiling On Monday

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WASHINGTON -(Dow Jones)- The Treasury Department auctioned $56 billion in new debt Tuesday and Wednesday, enough to take the U.S. over its federal debt ceiling when the three- and 10-year notes settle on Monday.

Treasury officials last month flagged May 16 as the day the government would hit the $14.294 trillion debt limit.

The U.S. is selling $72 billion in new debt over three days this week. The Treasury auctioned $32 billion in three-year notes Tuesday and $24 billion in 10-year notes Wednesday, and will sell $16 billion in 30-year bonds Thursday. All of the auctions will settle Monday.

As of Tuesday, total debt subject to the limit was $14.274 trillion, according to the Treasury Department.

The federal budget deficit widened in April, with the government spending $ 40.49 billion more than it collected last month, a Treasury Department report said Wednesday.

The deficit was the 31st monthly shortfall in a row. With seven months of fiscal 2011 elapsed, the government has spent $869.90 billion more than it has collected.

Even the most aggressive plans wouldn't wipe out budget deficits for years, meaning that debt will continue to mount.

http://www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=201105111542dowjonesdjonline000477&title=treasury-auctions-to-take-us-over-debt-ceiling-on-monday

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WASHINGTON -(Dow Jones)- The Treasury Department auctioned $56 billion in new debt Tuesday and Wednesday, enough to take the U.S. over its federal debt ceiling when the three- and 10-year notes settle on Monday.

Treasury officials last month flagged May 16 as the day the government would hit the $14.294 trillion debt limit.

The U.S. is selling $72 billion in new debt over three days this week. The Treasury auctioned $32 billion in three-year notes Tuesday and $24 billion in 10-year notes Wednesday, and will sell $16 billion in 30-year bonds Thursday. All of the auctions will settle Monday.

As of Tuesday, total debt subject to the limit was $14.274 trillion, according to the Treasury Department.

The federal budget deficit widened in April, with the government spending $ 40.49 billion more than it collected last month, a Treasury Department report said Wednesday.

The deficit was the 31st monthly shortfall in a row. With seven months of fiscal 2011 elapsed, the government has spent $869.90 billion more than it has collected.

Even the most aggressive plans wouldn't wipe out budget deficits for years, meaning that debt will continue to mount.

http://www.nasdaq.co...iling-on-monday

We're going to be in deep çhit because of unfunded entitlements.

That's the bulk of where the deficit is coming from.


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WASHINGTON -(Dow Jones)- The Treasury Department auctioned $56 billion in new debt Tuesday and Wednesday, enough to take the U.S. over its federal debt ceiling when the three- and 10-year notes settle on Monday.

Treasury officials last month flagged May 16 as the day the government would hit the $14.294 trillion debt limit.

The U.S. is selling $72 billion in new debt over three days this week. The Treasury auctioned $32 billion in three-year notes Tuesday and $24 billion in 10-year notes Wednesday, and will sell $16 billion in 30-year bonds Thursday.

Well, that Thursday auction happened today. And the results are not encouraging.

The auction was undersubscribed in comparison to recent activity, to the lowest ratio in 6 months. Down to 2.43:1 from a recent historical average of 2.70:1. Sounds like somebody is sitting up and paying attention to the games being played in Washington.

Moreover, the traditional big foreign buyers (central banks in China, Japan etc.) did not show up to the party, buying only 33% and down from a typical 40% share in recent auctions. Maybe the jig is already up, and the political fallout of not raising the debt ceiling is implicitly showing up now in this week's auction. Just because Geithener says we have till Aug to do a deal doesn't mean the bond traders have to do his bidding. Granted, a bump in yield on the 30-year from 4.34% to 4.38% is hardly a calamity but this may just be the canary in the coal mine.

http://www.bloomberg.com/news/2011-05-12/treasuries-extend-declines-after-auction-of-16-billion-of-30-year-bonds.html

Treasuries Decline as 30-Year Bonds Attracts the Lowest Demand in 6 Months

By Susanne Walker and Daniel Kruger - May 12, 2011 3:44 PM CT

Treasuries fell after the government’s auction of $16 billion in 30-year bonds drew the lowest demand in six months amid an easing of risk aversion.

The bonds attracted $2.43 in bids for every $1 of debt sold, the lowest bid-to-cover ratio since November, and down from an average of $2.70 at the past 10 sales. The bonds were sold at a yield of 4.38 percent, compared with an average forecast of 4.343 percent in a Bloomberg News survey of eight of the Federal Reserve’s 20 primary dealers. The offering was the final of three auctions this week totaling $72 billion.

“It’s risk-on, risk-off one day to the next,” said Thomas Roth, senior Treasury trader in New York at Mitsubishi UFJ Securities USA Inc. “The auction was not as well attended as people expected. People are hesitant and a little gun-shy.”

The benchmark 30-year bond yield rose five basis points, or 0.05 percentage point, to 4.35 percent at 4:43 p.m. in New York, according to Bloomberg Bond Trader prices. The yield touched 4.25 percent on May 5, the lowest level since Dec. 7, after rising to 4.79 percent on Feb. 9.

The 30-year yield will rise to 4.9 percent by year-end, according to the average forecast in a Bloomberg News survey of financial companies, with the most recent forecasts given the heaviest weightings.

Risk Reverses

U.S. stocks and commodities advanced, as riskier assets recovered from an early slump amid speculation that recent declines were excessive. The Standard & Poor’s 500 Index rose 0.5 percent, after dropping as much as 0.8 percent. The S&P GSCI Index of commodities climbed 0.1 percent after tumbling as much as 2.3 percent.

At the bond auction, indirect bidders, a class of investors that includes foreign central banks, bought 33 percent of the securities, compared with 47.2 percent at the April auction and an average for the past 10 auctions is 40.9 percent.

“Indirect bidders showed up less and it was a bigger auction,” said Ray Remy, head of fixed income in New York at primary dealer Daiwa Capital Markets America Inc. “The Wall Street community, the primary dealers, bought more than they normally would.”

Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, purchased 8.7 percent, compared with 10.8 percent at the last sale and an average of 10.9 percent at the past 10 auctions.

Jobless Claims

Treasuries rose earlier as the number of Americans filing first-time claims for unemployment insurance payments fell less than forecast last week, indicating recovery in the labor market is taking time to accelerate.

Applications for jobless benefits decreased 44,000 in the week ended May 7 to 434,000, Labor Department figures showed. Economists forecast 430,000 claims, according to the median estimate in a Bloomberg News survey. The number of people on unemployment benefit rolls rose, while those getting extended payments decreased.

A separate report today showed sales at U.S. retailers rose in April, reflecting gains at service stations and grocery stores as fuel and food prices climbed. The 0.5 percent increase was the smallest since July and followed a 0.9 percent March gain that was more than double the previous estimate, Commerce Department figures showed. The median forecast of economists surveyed by Bloomberg News called for a 0.6 percent rise.

“The consumer is still in the game,” said Charles Comiskey, head of Treasury trading at Bank of Nova Scotia in New York. “It’s not telling you the consumer is retrenching or buying everything off the shelf.”

Wholesale costs in the U.S. rose more than forecast in April, led by higher prices for food and fuel.

Inflation

The 0.8 percent increase in the producer-price index compares with the 0.6 percent median estimate of economists surveyed by Bloomberg News, Labor Department figures showed today in Washington. The so-called core measure, which excludes volatile food and energy costs, increased 0.3 percent, more than projected.

A report tomorrow is forecast to show the consumer price index rose by 0.4 percent in April, compared with a rise of 0.5 percent in the previous month, according to 76 forecasts in a Bloomberg News survey of economists.

The difference between the yields on 10-year debt and Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices over the life of the debt, narrowed to 2.39 percentage points today, the lowest since March 24, signaling investors expect inflation to remain tamed. It reached a 3-year high of 2.67 percentage points on April 11. The average over the past decade is 2.10 percentage points.

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Who would buy soon before an interest rate spike? :unsure:

Well, Bill Gross agrees with you. He pulled Pimco out of all Treasury holdings months ago.

Disclosure: I hold no Treasuries, not because of fear of default, but due to the crappy yields. I do hold US-denominated corporate bonds though. I'm still a long time buyer of USD issues. Rising rates don't worry too much: I buy for reasonable yield at tolerable risk for mid-term maturities, and then hold on till maturity.

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Well, Bill Gross agrees with you. He pulled Pimco out of all Treasury holdings months ago.

Disclosure: I hold no Treasuries, not because of fear of default, but due to the crappy yields. I do hold US-denominated corporate bonds though. I'm still a long time buyer of USD issues. Rising rates don't worry too much: I buy for reasonable yield at tolerable risk for mid-term maturities, and then hold on till maturity.

:yes: I read that too. I also noticed he jumped out after China unloaded 250+ billion but before S&P U.S. credit rating outlook downgrade. Better late than too late. :thumbs:

Well, actually Fed-debt has performed OK lately but, QE2 ceasing will fix that.

Edited by Vi-Jay

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