How Much Can We Borrow?

Here’s a rather sobering report from the Wall Street Journal. The Treasury could sell more than $400 billion in notes and bills during the last few weeks of this year. This is in addition to purchases the Fed plans to make.

The truly surprising assertion in the article is that such massive borrowing is not expected to have any impact on yields as the rush to safety is expected to continue.

“The market is in survivor mode,” said Ward McCarthy, managing director at Stone & McCarthy. “So many horrible things have happened and the economy is in such bad shape. The smart thing to do is to hide in Treasurys.”

Of course, all of this begs the question as to how long this supposedly inexhaustible supply of cheap money is going to be available. Keeping in mind that this is probably going to be considered chump change once the new administration starts spending in earnest, we must hope that our creditors have a lot of faith in us.

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