Thread by @SomeBitcoinDude

1/ US Debt by years until maturity, a thread.
#bonds #debt #bitcoin #macro #wtfhappenedin1971

2/ Yield curve is a hot topic. I figured a deep dive into the US gov debt maturities would be useful for some. US gov debt is skewed to short term, just like our elected representatives (surprise!).
Chart note: the 2 year bar includes 28 year old 30Y, 3 year old 5Y, so on

3/ The US has $23T in marketable and $7T in non-marketable debt. Non-marketable includes debt held by the military pension, etc. The US government has *many* liabilities beyond these bills/notes/bonds issued directly by the US government.

4/ Quasi-gov agencies (Fannie, Freddie, Sallie) also issue debt (implicitly?) guaranteed by feds. In 2008 US took over Fannie/ Freddie. So, real US liabilities are >$30T. @LukeGromen is a top follow on this.

5/ Side note, total US student loan debt is $1.7T, though not all of that is federally guaranteed. Forgiveness of all student loan debt would pile another $1.7T onto this problem.

6/ Of the $23T in marketable securities, $2.3T are TiPS or Floating Rate, so I kept them out of my chart to keep things simple.

7/ The US debt ladder is skewed to short duration, as 44% matures within 2 yrs. This $9T must be rolled at massively higher rates. Plus, some portion of the $2.8T annual deficit will be borrowed short term; lets assume 44% of it. How does the gov do this?

8/ Option A: Pay it off
First, HAHA! No chance
Second, The Treasury General Account has ~$600B in it, and there’s $939B of debt due in Apr 2022 alone. Even the seized Russian currency reserves wouldn’t help us finish out the month.

9/ Option B: issue more short duration bonds. To simplify, lets assume that this was all 1 & 2 year debt issued at about 0.10% and 0.20%. The 1Y is now trading at 1.66% and 2Y at 2.27%. The annual interest on $9T worth of short term debt has increased by ~$155B.

10/ The DoD annual budget is $750B + some hidden items, so about $811B total. So w/ new interest charges the USA basically just added a second Navy. Or, it added the entire militaries of UK, France and Italy. By the way UK and France are 2 of only 9 nuclear powers.

11/ $155B in new interest per year matters. That's 10 new Ford class aircraft carriers PER YEAR, which would almost double the existing 11. Although, that's kinda small down there for $13B but whatever.

12/ But, what if yields keep climbing to close the gap with inflation? If 1Y and 2Y yields return to pre-covid peak of 2.7% and 3.0%, that’s $250B/year of new interest. US corp taxes in FY21 were *only* $238B as a reference.

13/ Option C: Sell 20Y and 30Y bonds.
The US issued ~$314B of 30Y last year. This was already about 50% jump from pre-covid levels of ~$210B. Even if 30Y 2x'd to $640B, that would only solve a tiny fraction of this $9T problem and could risk long yields spiking to insane levels

14/ Who would buy these potential trillions in new 20Y and 30Ys at any rate under 5% ish? Foreign governments like China and Russia? Pension funds that need to make 8% return to meet promises? Ordinary patriotic citizens buying war bonds like WWII?

15/ The US is forced to refinance at massively higher rates. Why didn’t the US sell more long bonds while rates were low? Well, they did kinda. There's a tiny bump at the 20 year mark in my original chart. This is in part due to US re-opening of 20Y bonds in May 2020.

16/ The US sold $222B of new 20Ys in 2020, which the market slurped down at 1.12%. But inflation was 2% then.
Bet they wish they had tested the market with a lot more back then at low rates.

17/ Note: zero bonds maturing btw 11-13 yrs. Either ZERO 30Y were issued in 2003-2006 or the Fed bought them? @timevalueofbtc or @FedGuy12 any idea why there are no bonds of this vintage? Does this allow for a massive auction of 10Y in 2023 without moving rates too much?

18/ Conclusion: US gov is in a massive debt spiral as it rolls $9T of short debt at high rates that can still go higher to match inflation. Everyone should take steps to protect their finances for what is about to happen. #Bitcoin is great insurance.
@FossGregfoss @RayDalio

19/ The purpose of this thread is to show visually some of the macro issues w/ US debt. I am not a bond trader, nor do I work at the fed, comments appreciated.
@beth_stanton @lynaldencontact @biancoresearch @MetreSteven @JeffSnider_AIP @EmilKalinowski @matthew_pines

20/ Data available here: Data: treasurydirect.gov/govt/reports/p…

END.

PS/ Figured I should tag some troublemakers from the "This is fine" camp so get their take on refinancing $9T at 10x higher rates.
@SantiagoAuFund @EconomPic @cullenroche