The U.S. Treasury continues its colossal debt issuance while the Federal Reserve takes steps to counter the mounting threat of illiquidity in the Treasury market. The Treasury announced April 29 that it expected to issue $243 billion in net new debt in the quarter April-June, having borrowed $748 billion in net debt in the January-March quarter; and that it expects to issue $847 in net new debt in the July-September quarter. That makes a projected $1.84 trillion net new U.S. debt for those three quarters, keeping up the incredible pace of $2.5 trillion/year in new debt. The “low” April-June amount reflects the preponderance of Federal tax revenue coming in during that quarter, but another drop in expected tax revenue required $41 billion more debt issuance for that quarter than the Treasury had estimated three months earlier.
So, the Federal Reserve announced, on May 1 at its Federal Open Market Committee (FOMC) meeting, that its program of reducing its balance sheet, by selling off Treasury securities holdings, is being scaled way down beginning with May, from $65 billion/month to $25 billion/month. Fed Chair Jerome Powell, at his press conference that day, made sure to state that the Fed does not anticipate its “next move” (whenever it might be) will be raising rates, but rather lowering them. And the Treasury announced that in May, it is beginning to buy back its own debt, clearly signaling that it expects the new debt it issues in order to do this, will have lower interest rates than the old debt it buys back.
While these two partners of the current U.S. war/economic warfare regime engaged in this circus high-wire act, to lower rates and prevent a Treasury market and/or regional banks crash, the U.S. Labor Department played the accompanying clown in the circus ring below. It put out an April “jobs report” with a markedly lower new jobs total—175,000—than previous months; a drop in the average work week owing to more and more part-time work in the economy; and average weekly wage growth of just 3.9% for the year to April. Since the falling new jobs total was just the artifact of different “seasonal adjustments,” one can believe it or not, that hiring slowed down. Like the “suddenly falling” GDP growth to an annual 1.6% rate in the first quarter, these reports are just what the Federal Reserve ordered, to help it shift toward “accommodative” money-printing, as Treasury market problems get worse.
