Treasury auctions have become a facade. Primary Dealers are inflating bid/cover ratios with mechanical bids, masking the collapse of real private investment demand. Non-dealer participation has dwindled to rollover flows, with no organic buying pressure left in the system.
The market continues to pretend auctions are strong because total debt supply has been held down by T-bill paydowns. That temporary support ends this summer when the debt ceiling lifts and net issuance surges.
When that happens, the mechanical support will fail. Dealers will no longer be able to absorb the supply at current pricing levels, and yields will reset violently.
This Special Report illustrates the evolution of the supply and demand dynamics that will lead to imminent crisis — with Lee Adler’s clear charts based on 58 years of charting and data analysis.
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