US Borrowing Nearly $300 Billion This Week

Mar 28 2018

The Treasury Department plans to sell a record $294 billion worth of bills and notes this week, according to Bloomberg. The tax cuts signed into law by President Trump are causing a decline in federal revenue, which means the government needs to borrow more to fund its operations. "The amount of debt that has to be issued to fund the tax bill is tremendously high," Rick Rieder, chief investment officer of fixed income at BlackRock, told CNN Money.

The sale comes at an awkward time, as the Trump administration threatens a trade war with China, the top foreign holder of U.S. Treasury bonds. China, which owns roughly $1.7 trillion in U.S. debt, has begun to trim those holdings, and signaled last week that it could reduce debt purchases as part of its response to tariffs imposed by Trump.

The possibility of decreased demand from China, coupled with the Federal Reserve’s pullback as it unwinds its response to the financial crisis, has created what Rieder called “a tricky dynamic for the markets.” While no one thinks the market for U.S. debt will dry up, there’s a good chance that interest rates will have to rise in response to the huge supply coming from the Treasury. "No one will abandon US Treasuries,” said Guy LeBas, chief fixed-income strategist at Janney Capital, “but they may demand higher interest rates."

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