{"id":5948,"date":"2026-05-10T02:38:17","date_gmt":"2026-05-10T02:38:17","guid":{"rendered":"https:\/\/stock999.top\/?p=5948"},"modified":"2026-05-10T02:38:17","modified_gmt":"2026-05-10T02:38:17","slug":"the-government-must-issue-more-debt-than-expected-on-weak-cash-flow-the-bond-market-is-shouting","status":"publish","type":"post","link":"https:\/\/stock999.top\/?p=5948","title":{"rendered":"The government must issue more debt than expected on weak cash flow \u2014 ‘the bond market is shouting’"},"content":{"rendered":"

<\/p>\n

The Treasury Department announced this week that it expects to borrow more than anticipated in \u200cthe current quarter as incoming cash flow has been weaker than initially projected.<\/p>\n

The $189 billion now estimated for the April-June quarter is $79 billion more than what Treasury saw in February. And after adjusting for a larger-than-expected cash balance at the start of the quarter, the new borrowing guidance is actually $122 billion higher.<\/p>\n

With tax-filing deadlines coming in April, the spring quarter typically requires less borrowing than other times of the year. For comparison, the Treasury Department borrowed $577 billion\u00a0during the January-March quarter and expects to borrow $671 billion July\u2013September\u00a0quarter.<\/p>\n

But this filing season, Americans benefited from new tax breaks enacted in last year\u2019s One Big Beautiful Bill Act. In addition, the Supreme Court struck down President Donald Trump\u2019s global tariffs earlier this year, and importers have started getting refunds. As much as\u00a0$166 billion could be returned.<\/p>\n

For Mark Malek, chief investment officer at Siebert Financial, the borrowing update is the latest example of the immense supply of fresh debt that the Treasury Department is issuing.<\/p>\n

In a recent blog post titled \u201cThe bond market is shouting,\u201d he pointed out that the Federal Reserve has cut the benchmark rate by 175 basis points since mid-2024, but the 10-year Treasury yield has only dipped by about 35 basis points.<\/p>\n

\u201cThat kind of disconnect is not normal,\u201d Malek warned. \u201cIn fact, analysts who have tracked the relationship between Fed policy and long-term yields going back to 1990 describe it as unprecedented. The bond market is not broken. It is sending a message. And if you know how to listen, it is shouting.\u201d<\/p>\n

The shouting is coming from\u00a0\u201cbond vigilantes,\u201d a term coined by Wall Street veteran Ed Yardeni\u00a0in the 1980s, referring to traders who protested huge deficits by selling off bonds to push yields higher.<\/p>\n

But unlike prior episodes when bond vigilantes made a dramatic splash in financial markets, today\u2019s moves are \u201ca slow, structural pressure campaign\u201d driven by three forces, according to Malek.<\/p>\n

The first is the enormous supply of bonds being issued as annual budget deficits run at roughly $2 trillion per year with interest costs alone at $1 trillion. The recent explosion of debt even prompted the IMF to warn the \u201csafety premium\u201d on Treasury bonds is disappearing.<\/p>\n

\u201cWhen you flood the market with supply and simultaneously chip away at the credit quality perception, bond buyers require higher yields to compensate,\u201d Malek wrote. <\/p>\n

Second, the term premium has widened from near zero, when it was suppressed by the Fed\u2019s bond purchases, and has recently been \u201creasserting itself with a vengeance,\u201d he said. <\/p>\n

The third factor is the changing makeup of the Treasury bond market. Steadfast buyers like central banks in China and Japan have pulled back, while less patient investors like hedge funds have stepped in.<\/p>\n

A wildcard is the tech sector, which has seen so-called AI hyperscalers issue a tsunami of corporate debt that\u2019s competing against Treasury bonds for investors\u2019 dollars. Meanwhile, incoming Fed Chair Kevin Warsh is expected to shrink the central bank\u2019s balance, adding more upward pressure on yields. <\/p>\n

Ultimately, the bond market is sending a message about the economy, and it isn\u2019t swayed by trendy narratives, Malek said.<\/p>\n

\u201cIt can only price what it sees,\u201d he concluded. \u201cAnd what it sees right now\u2014$39 trillion in debt, a trillion dollars a year in interest costs, six Fed cuts that barely moved the long end, a foreign buyer base in quiet retreat, and a new Fed chair likely to pull back the one remaining artificial support\u2014is a future where capital is scarce and patience is rewarded, but complacency is not.\u201d<\/p>\n

#government #issue #debt #expected #weak #cash #flow #bond #market #shouting<\/p>\n","protected":false},"excerpt":{"rendered":"

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