Federal tax collections looked strong for the full month in February.
Don’t be fooled. It was an illusion due to a calendar effect and inflation.
That’s a sudden, dramatic sea change from the strong growth path of the past 6 months or so.
This bodes ill for my expectation that a booming economy would boost tax revenues to help offset the amount of new Treasury issuance that the market would need to absorb. Even taking that optimistic assessment of tax collections into account, I had expected the market to still be unable to digest all the new supply without the Fed doing the lion’s share of it. I had still expected an ongoing bear market in Treasuries.
Now the situation looks even worse, and the short term flight to safety rally isn’t helping the situation.
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