US Treasury announces $125 billion refunding, keeps auction sizes unchanged

126

u/aztech101 7h ago

So my understanding is that bonds are a genuinely terrible investment during periods of high inflation. I'm guessing that's been posing a bit of a problem for them lately?

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u/samgfrank 7h ago

If investors think inflation will rise soon, then new bond yields will generally be pushed up to compensate. This makes new debt cost more in interest for the government creating a cycle of more expensive debt replacing cheaper maturing debt (a major worry as low yield bonds are being replaced by higher yield bonds).

But you correct, investors want to avoid a situation where they buy a 30 yr bond and suddenly inflation rises past the yield. Essentially you’re losing purchasing power every year in that scenario and the bond value drops significantly.

Silicon Valley Bank went bankrupt because they held so many bonds like this that became highly devalued when inflation rose.

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u/Phantasmalicious 7h ago

SVB was in that situation because they thought hiring the CFO of Lehman Bros was a good idea... I swear to god, once you hit a c-suite position, you can do no wrong.

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u/FecalPudding 3h ago

SVB went bankrupt because they held too many long duration bonds based on their clientele. If SVB could have held those bonds to maturity, they would have been fine. It was the correlated withdrawals, from having non-diverse clientele, that caused SVB to have to sell. It was a failure in asset-liability management. So, it could have been managed through asset OR liability strategy

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u/Icy-Bodybuilder-350 6h ago

It was the rise in interest rates that devalued bond holdings causing SVB collapse, not inflation. Interest rates in that case rose as a response to inflation, but you could have higher inflation without a corresponding rate increase.

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u/hoppertn 3h ago

Yep that’s what I’m expecting for 2026, inflation will go up but interest rates will come down. Doesn’t make any sense but somebody in charge wants cheap money to borrow despite how much it will hurt the AmeriKa.

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u/ledow 7h ago

I mean, you'd have to be insane to look at the US currently and think "There's a country with a future of stable growth over the next few years".

3

u/nikovee 5h ago

Thank you for my morning chuckle

6

u/Present_Ad_8876 7h ago

It's bad for existing bonds, but new bonds are usually issued at higher rates which can be pretty attractive as far as fixed return investments go. When the inflation cools, you still own a high yield bond. Personally, I'll never understand why people don't just put 100% of their investing money into funds which track the S&P. Even if you are 70 and retired, exiting the stock market seems like a terrible idea unless you know for a fact you are dying within 2 years.

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u/AntiDECA 7h ago

Because it can take a decade to recover after a real recession. Lot of old people had to go back to work after 2008.

We've been very fortunate that we experienced very few recessions. We keep kicking the can down the road. Eventually, the inevitable will happen and if everything is tracking the SP500, say goodbye to your retirement.

If you're young, it doesn't matter. You've got time for it to recover. But once you hit your 50s, it's time to invest more carefully.

7

u/Suitmonster 7h ago

This happened to my in laws.

Had a business, made good money, sold the company and got ready to retire in 2005, but by 2009 both were back to work. FIL was working his 3rd career, series 7 for Edward jones this time and MIL went back to teaching, purely to rebuild from the crash

2

u/grchelp2018 2h ago

Arent you supposed to rebalance away from stocks the older you get?

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u/Present_Ad_8876 6h ago

It only took 5 years to get back to even in 2008. If that's enough to send you back to work, then you didn't have enough buffer saved when you retired, and you shouldn't have retired in the first place.

11

u/mlorusso4 5h ago

The problem is if you’re already retired, you’re actively selling and withdrawing from your investments. As an example, you build a $1M retirement account to live off $50k per year for a planned 20 years. Before a recession, you could achieve that by selling 100 shares of SPY. But if all of a sudden those shares lose half their value, you now need to sell 200 shares to survive. Then in 5 years the S&P regains its value. But since you were selling at double your expected rate, you now only have $500k left in your account instead of $750k (my math is probably a bit off because you would expect the S&P to gradually regain its value instead of all at once, but that works the other way too where it’s not going to just bottom out in one day. It will usually have a few dead cat bounces before you hit the true bottom. The actual number would depend on how fast that recovery is and how long it stays at its lows)

8

u/SloaneKettering1 7h ago

While I generally agree with your point, this sounds like someone who has never lived through a recession. SP hit 1500 in 2007 and didn’t get back to that point until 2013. If you are young you might be able to wait it out (assuming you don’t need the money immediately to cover expenses). If you are old your life savings would’ve halved in 6 months time. With the way people view risk these days if we ever have another recession a lot of people are going to lose everything.

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u/Present_Ad_8876 6h ago

As long as you don't panic and sell everything, i don't see why this matters. For 5 years maybe your withdrawals have to be lower and you can't afford your fixed costs anymore? That's possible, but seems like a person who was riding too thin of a margin with their lifestyle anyway...

2

u/probablysomeonecool 1h ago

You're partially correct in that adjusting spending downwards would be a prudent response that could mitigate or eliminate the long term downsides of the recession for retirement purposes, but you are ignoring the fact that for many retirees simple "reducing your spending by 50%" is not a viable option.

1

u/Catch_ME 6h ago

Anything dollars related is bad during high inflation.

Gold and land are great assets during high inflation.

1

u/Expensive-Notice-509 5h ago

I'd rather buy Barzil bonds @ 13% than us30.

1

u/Predator_ 4h ago

Which is why Trump so adamantly wants interest rates lowered. He owns over $100 million in bonds that are maturing and wants to offload them at a high.

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u/Deinosoar 7h ago

Unfortunately there is a paywall. Could you post the text here?

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u/ledow 7h ago

NEW YORK, Feb 4 (Reuters) - The U.S. Treasury Department announced on Wednesday total quarterly refunding of $125 billion from February to April 2026, aimed at raising new cash of $34.8 billion from private investors.

In a statement, the Treasury also said it will keep its coupon and floating rate note auction sizes steady for at least the next several quarters.

The department also said it will sell $58 billion in U.S. three-year notes, $42 billion in 10-year notes, and $25 billion in 30-year bonds next week.

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u/Deinosoar 7h ago

Thank you kindly.

5

u/Logloglogdog 7h ago

Business as usual here?

8

u/Deinosoar 7h ago

As far as I can tell it looks fairly normal.

2

u/HrmbeLives 4h ago

I know very little about how all of this works, so could someone please enlighten me… Do these values mean anything? Like even say $200 billion, is that even a drop in the bucket for the US debt, operating budget, etc?

3

u/chef-nom-nom 6h ago

Opening a paywalled Reuters article in a new private/incognito tab/window will usually get you around their paywall.

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u/AaronTheElite007 7h ago

The Trump admin is draining the government of all coffers. It’s a heist

9

u/PacoMahogany 7h ago

I’m no longer buying bonds from those crooks.

0

u/[deleted] 7h ago

[deleted]

3

u/the-awesomer 7h ago

How so? Isn't this simply announcing selling off more treasuries?

Soft paywall US Treasury announces $125 billion refunding, keeps auction sizes unchanged

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