US Treasury has to issue 10 trillion of US debt in 2024 and...

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kacy

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09/04/24

13:00

Post #: 73257598
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Originally posted by Ewebute: ↑

I read on Twitter, a large move into cash. Some into bonds and less into stocks. Why the large move into cash...

Overall agree with what you are saying. US Fed keeping rates higher for longer so they can rebuy those prior issued bonds at cheap rates. I think there is still a concern over the govt not being able to pay for a lot of their debts as they need someone to buy them going forward. If the money or buyers fade away, then it will all collapse. Every market has a collapse at some stage, and bonds will not be immune which means a default. Maybe bonds are dropping in price because the buyers are fleeing?

Your scenario might play out in the way foretold, so I will add it to the possibilities going forward. I believe more that the markets once in free fall, will continue for a bit longer than the outcome of the election. They should have played the hand in October last year and let the correction and recovery happen around now. Everything is part of the bigger plan, so we are all being played in one way or another. Reality will hit and then the markets will move in whatever way they want anyway

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US Treasury has to issue 10 trillion of US debt in 2024 and their biggest bond buyers (Japan & China) have become sellers for their own reasons (see here). So, if they cant find others to buy all these bonds and T-Bills the US gov. will go broke. So, everything is now rigged toward achieving this objective. (i.e. interest rates, data, news, fed talk, the narrative, stock market, everything!)

No one in their right mind buys bonds if they think inflation (and interest rates) are going up. The best time to buy bonds is before a recession when interest rates are about to be cut. But there is no prospect of a recession and the labor market is strong - so its possible inflation could take off again like it did in the 70s! So, how are they going to sell all these gov bonds & T-bills???

There are two plan's which I mentioned here. Both involve doing deals with the big banks. The deal is "we will drive bond rates up, you buy all the bonds, we will then cut rates - so you will make heaps out of it". This means the fed cant cut rates until after the banks have bought all the bonds. It also means the fed is going to keep up its hawkish remarks until all the bonds have been sold and then the fed is going to change its tune.

Plan-A (GFC) is not popular with the Biden camp, so its probably Plan-B for now. But have the banks got enough cash to buy all these bonds? If not, or if Plan-B fails to sell all the debt at the next auction, then they will have no choice other than to do Plan-A (GFC).

Either way, expect the smart money to start rotating out of stocks (and cash) and into bonds putting downward pressure on the stock market.

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0 Great analysis

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