As the U.S. Treasury prepares, once again, to auction off a record amount of securities next week to pay for the ongoing expenses of the U.S. government, chatter is, once again, swirling over whether investors will demonstrate sufficient appetite for $115 billion worth of Treasury bills, notes, and bonds.
The last time we went through this, a month ago, investors turned out to be quite eager to snap up $104 billion worth of Treasuries. But with the stock market drawing more interest in recent weeks, it's anyone's guess how the scenario will play out next week, as we continue to explore the un-navigated territory of funding contemporary mammoth government deficits. No matter how you look at it, $115 billion is a big chunk of moolah, and if the auctions go badly, you can be sure the political debate about the power of the bond market versus the Obama agenda will erupt again.
But things could be a lot worse. The U.S. could be in China's position, where the government is finding it surprisingly difficult to sell its own bonds to the public.
For all the talk this year about the Chinese refusing to buy U.S. bonds, the real story is about the People's Republic of China's failure to find buyers for the equivalent of $1.7 billion of its debt because too many investors showed no interest at auctions that would be considered disastrous if their outcomes were repeated on Wall Street.
China may have a more effective stimulus plan, a faster growing economy, a bigger car market, and more manufacturing prowess than practically the rest of the world combined, but it still can't sell its own bonds. So here's one reason to take pride in massive U.S. government deficits. It gives the U.S. a bragging point!