Would Hamilton be proud of Insurance Company Floats facilitating the artificial suppression of rates
- Strategeriest
- Jul 6, 2021
- 2 min read
Good afternoon,
It looks like Thursday’s ten-year auction is going to be auctioning off the rest of cusip 91282CCB5. There is about 21B of the notes left with the 1.625 coupon rate. Given today’s yield that means the market is expecting the average price of the remaining notes of this issuance to be sold at around 101.9 and the next coupon is expected to be issued at lower than 1.5%. Seems unreasonable to me, I expect them to go for less than par. Repo, but goodness gracious… HTF is no one else putting a risk premium on these notes.
The June and July figures from the treasury are not out yet regarding the State of The Nation’s Treasury. It does look like the government managed to pay down some of its debt in May though, which honestly, I was never expecting to see again.
Considering this, I amended my estimation that the government will be able to cover interest payments on its debt with tax revenue until about January of 2040. Even still…… I do not think this is a risk-free note anymore. Hopefully this will begin to be reflected in the market to help deleverage the equity bubble, allow those suffering from capital ratios and margining a bit of reprieve, and help insurance floats stay solvent in perpetuity, even if they have to continue holding their government mandated debt allocations.
My ballpark estimation of yearly accumulated government debt to revenue was off a bit this year. the estimate was for June, I posted it as a reference in my January 15th post. It was close though; the National Debt Clock is a good reference to check the work.
I’ll post a revised copy once the June figures are out. Attached is the rate path I am expecting into August.
Warmest Regards,
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