On February 23, the US Treasury pumped $55 billion in cash into the accounts of Primary Dealers, banks, money market funds, and other institutions who had held the T-bills that were expiring that day. These redemptions began the US Treasury’s series of massive, twice weekly paydowns of the US government’s short term debt.
The purpose of the paydowns was twofold. First, the Treasury is required by the current budget law to whittle down its cash from a peak of $1.8 trillion last year, to $133 billion by August. Treasury Minister Janet opted to start the process by paying down existing short term debt.
That accomplished the second goal, which was to force holders of the expiring paper to buy longer term debt. Despite their protestations that all is well, economic policy makers know that the crash in Treasury note and bond prices is causing a crisis in the Primary Dealer system.
Minister Janet works very closely with Lord Jaysus of the Fed, of course. They expected that the T-bill paydowns would help to reverse the decline in the prices of Treasury notes and bonds by forcing cash into the accounts of dealers and investors. It didn’t work. At least not to the extent that they needed. The full report is reserved for subscribers.
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