Thursday, October 8, 2009

Debt Limit Is Fast Approaching

as the U.S. dollar continues to decline and the 30-year bond auction meets tepid result today.

The debt limit is currently set at $12,104 billion.

The tiny widget on the left top corner of this blog is ticking away, and it is now at $11,949 billion.

Mere $155 billion, and the limit will be reached. That's less than one-month issue of Treasury notes and bonds these days, which averages around $180 billion for the last 3 months.

The stock market gave up a chunk of gains for the day (still positive) on the announcement of the 30-year bond auction result.

But what caught my eyes was the sale of $10 billion 16-day Cash Management Bill (CMB). It matures on October 29, and pays the same interest as 4-week bill. That's where the Primary Dealers put their money today, not 30-year bond. (For details of today's auction, please go to my site on Treasury auctions, here.)

CMB is usually used to fill temporary shortfalls in the government budget so that the government can continue to operate (=to spend more). 16 days to tide them over until Congress approves yet another debt limit increase, as Treasury Secretary Timmy Geithner requested back in August.

The U.S. government has temporary short falls in the budget permanently.

The debt limit was raised twice in the 2009 fiscal year. The second one was when the so-called stimulus bill was passed in February. Now that the Senate passed the defense bill that will cost $636 billion, the debt limit increase is a foregone conclusion.

Sea of debt, as far as eyes can see. Lovely.

The U.S. dollar index went down to 75.76 intraday, lowest in 14 months. Long-term (20-year) support at 80 has been long gone. There is a slight support around 75, a better support at 72. Below that, it's an uncharted territory. Literally.

Take a look at my post from May. Back then, the dollar index was still at the support, at 80. And that seemed dangerously low back then.


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