One might surmise that Treasury is hitting a hard high note on the Three Year Treasury issuance because this is the preferred duration of the central banks of China, Saudi Arabia and Japan among others, on behalf of their people.
At some point the Ten Year Note may become the favorite product of Mr. Bernanke, our own central banker, as a chaser to the the junk bond cocktails he is chugging down now.
As an aside, check out the action on the long end of the curve today in Big Daddy, the 30 Year Bond.
Across the Curve
Treasury Supply
By John Jansen
January 5th, 2009
Henry Paulson is not following the sage counsel of TS Eliot and is instead going out with a bang rather than Eliot’s whimper.
The Treasury announced today that they will auction $30 billion 3 year notes on Wednesday. The increase in issuance here is stunning. The 3 year was reintroduced in November at $25 billion. In its previous reincarnation it was a quarterly issue.
The US government has a desperate need for cash and in their infinite wisdom the debt managers chose to place this bond on a monthly cycle. In the span of two months they have bumped the total from $25 billion to $30 billion. If we start with the November issue and make the poor assumption that they will not tweak this again, the Treasury will raise an incredible $353 billion the 3 year sector in the year that ends October 31 2009.
The Treasury also announced the reopening of the 10 year note for a second time. Treasury issued $20 billion in November and $16 billion when they reopened it in December.
Prior to November the 10 year auction occurred eight times each year. This is the first announcement of the expanded monthly cycle for that issue and they will sell $16 billion this time. That means that the taxpayers have issued $52 billion to the public of this mega issue.
Previously the Treasury had announced that it would sell $8 billion TIPS tomorrow.
I rarely wade into the bill pit but to make the point I would be remiss if I did not note the supply in that market.
Each Monday since time immemorial Treasury has issued three month bills and six month bills. Today is no different and they will raise in total $53 billion in those auctions.
I do not have the auction dates but the Treasury will also sell $24 billion four week bills and $35 billion special 70 day bulls this week.
Sister Consolata taught me very well in grammar school ( they taught grammar in the 1950s. We would diagram sentences) and the sum of those numbers is $166 billion.
Against that background, I suggest that Hank Paulson is leaving a blazing trail of glory in his wake.
