1/ In case that you missed it... and let's talk about TGA
2/ The official reason for TGA to go parabolic was that Treasury desired to encumber the debt ceiling with extra 2T for CARES act spending.
They could have done it over 6-9 months. They chose to rush it by July 2nd after the TBAC target was published at the beginning of May.
They could have done it over 6-9 months. They chose to rush it by July 2nd after the TBAC target was published at the beginning of May.
3/ What the treasury did was to issue new tenors of Tbills (6-, 15-, 17-, 22-week, 30-40Bn each tenor for every week and $20-25Bn 9-month tenor once every month).
This was communicated to the Fed, which was part of the reason Fed had to do 80(UST)+40(MBS)Bn QE every month
This was communicated to the Fed, which was part of the reason Fed had to do 80(UST)+40(MBS)Bn QE every month
4/ The odd-tenor Tbill issuance is now largely done, except for the 9-month tenor. Treasury is going to either roll them over or let them mature gradually. And that's why TGA is peaking right now.
5/ Barring another round of stimulus, TGA should come down pretty quickly in 2H of July into Sept.
To hit the $800Bn EoQ target (unlikely), in each week we would need $80Bn fiscal (likely) + $40Bn of de-sterilization (Tbill/note/bond combined), as shown here
To hit the $800Bn EoQ target (unlikely), in each week we would need $80Bn fiscal (likely) + $40Bn of de-sterilization (Tbill/note/bond combined), as shown here
6/ It's unlikely that the Treasury would let the total debt fall, so a more reasonable EoQ3 target would be 1100-1200Bn. We would know for sure in August.
7/ So what this means to you? Some rules of thumb for Q3 2020.
Fiscal stimulus: $80Bn per week
QE: $80+40Bn per month (Fed, 100% chance) + $160Bn per month (Treasury, 25% chance)
Fiscal stimulus: $80Bn per week
QE: $80+40Bn per month (Fed, 100% chance) + $160Bn per month (Treasury, 25% chance)
