It appears there’s growing concern over the management of federal debt and deficit amidst the backdrop of recent financial maneuvers. Janet Yellen’s decision to draw down $5.7 billion from the Treasury cash account raises eyebrows, seen by some as an attempt to obscure the true scale of the deficit ahead of upcoming elections. This move, while potentially reducing immediate debt figures, could inflate long-term debt obligations to record highs once the accounting is adjusted.
Federal debt rose $10.9 billion on Friday, but the true daily deficit was worse, requiring Yellen to drain another $5.7 billion from the Treasury cash account; is the election year ploy in full swing to make the deficit and debt look smaller than they really are? pic.twitter.com/6zTk7IpAvd
— E.J. Antoni, Ph.D. (@RealEJAntoni) May 28, 2024
Bond auctions, critical for financing government operations, have been lackluster at best, with recent seven-year notes showing lower demand than expected. This tepid market response underscores worries about the sustainability of issuing debt at such a rapid pace. Three consecutive auctions falling short suggest a cooling investor appetite, exacerbated by rising yields post-auction, signaling a challenging road ahead for Treasury securities.
The implications are profound: interest costs are set to surpass monumental benchmarks like Defense and Medicare spending for the first time in history by Fiscal Year 2024. Already, annualized interest payments have breached the $1 trillion mark, a stark reminder of the financial strain mounting on the federal budget. Without a shift in Federal Reserve policy towards rate hikes, these costs could balloon further to a staggering $1.6 trillion in 2024, adding substantial pressure to an already strained fiscal landscape.
Another average bond auction at best.
We can’t continue to issue debt at this pace.
Running out of buyers. t.co/0uvKU9x1vB
— QE Infinity (@StealthQE4) May 29, 2024
Interest costs will exceed Defense & Medicare spending for the 1st time in history in Fiscal Year 2024.
Interest has already surpassed $1 trillion for the 1st time on annualized basis.
Additionally, if the Fed will not hike rates it will get to a whopping $1.6 trillion in 2024. pic.twitter.com/P0eUU6NpvI
— Global Markets Investor (@GlobalMktObserv) May 29, 2024
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