$173 Billion Bills on Tap!
MegaCap Tracker Update
So now with the debt ceiling behind us the US Treasury is issuing $173 Billion worth of Bills tomorrow:
Now that the debt spigot is wide open and the spending frenzy in DC will allow the TGA to be replenished and for reserves to fall initially to only be replenished when all this new money gets paid out to the system. We suspect the US debt to explode and the round robin of Executive Branch/US Treasury/FRB coordinated money spigots will be spending ad infinitum and in due course will lower rates to combat all this issuance.
As we highlighted a few notes ago, this was our first Pillar to fall before we see a full fledged rotation out of key names in equities to a more diverse portfolio including the onslaught of front running fast money accounts going to buy up US Treasuries as soon as the next pillar falls!
Here is what we wrote on our 5/29 post:
So point #1 is gone and we will look to the next points to fall in line. When this happens we will suspect the top in equities will be put in as rates tumble and equities succumb to a massive global slowdown! There is a reason SA is cutting production, they know what’s coming! Here is Zerohedge on the cuts:
The US treasury market doesn’t like the initial onslaught of supply as Friday saw decent front end selling as the 2YR +16 Basis points and the 2s30 spread sunk another 11 basis points to -62.3!
The US Treasury yield curve's journey from -120 basis points to zero basis points and then to -62 basis points over a three-month period underscores the Federal Reserve's (FRB) ongoing battle with global bond markets. As the central bank grapples with economic indicators and market dynamics, uncertainty prevails. The ultimate outcome of this struggle will have far-reaching implications for investors, businesses, and the broader economy. By closely monitoring the Federal Reserve's actions and the yield curve's behavior, market participants can gain insights into the future direction of interest rates and plan accordingly, while acknowledging the persistent uncertainty that looms overhead. However it seems this time around there continues to be a major disconnect between global investors and the FRBs persistent hawkish stance!
We suspect the next few months will see even more volatility as the Biden administration continues to pump out the most egregious trend in NFP beats in history, let me know if you guys see an outlier in this chart:
Alright, with all that behind us let’s look at the MegaCap Trackers performance for the week ending June 2nd 2023:
The Nasdaq/SP futures 1*1 chart is at resistance and we definitely saw some accounts roll out of NQ and into SP on Friday:
We also want to remind you now that the US Govt is going to go parabolic with its debt, we suspect the FRB will ramp up QE as well and we have no doubt that if you investors want to see 6000 in the SP500, then FRB assets will swell, well past $12T in no time:
For those that think SP500 at 6000 is a stretch, know this, that in order to get there within 5 years, we need a 8.4% annualized return, basically the historical average! Now the bigger question is how do we get there? Do we drop to 2800 first then claw our way back or does this new found debt creation somehow lead us into a new 2012 to 2022 Bull style 4x hyperinflationary run? Only time will tell…
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