Earlier this week, I said that the big event coming up will be the Treasury auctions. Well, we haven’t even had the 10-year T-bond action yet and yields are already soaring.
This is the biggest week every for Treasury borrowing and it’s not going well. Since there aren’t enough bidders, yield are rising fast.
If the Treasury has a problem now, then it’s only going to get worse because the bulk of the stimulus money will be spent next year. The issue is that China is no longer buying our debt. The Federal Reserve will have to step into China’s place and start buying up excess Treasury debt. As a result, this floods the system with tons of the dollars (this is what the Fed means by “quantitative easing”). Just look at oil prices. They’re rising fast.