Eighty percent of U.S. Treasury bonds consist of short-term bonds, with new U.S. Treasury bonds maturing every month. From March to June, the maturing U.S. Treasury bonds are approximately $2.36 trillion, $2.8 trillion, and $2.4 trillion, along with just over $2 trillion in June. The total for the second quarter is only about $6 trillion in U.S. bonds.
The total of $9.2 trillion in maturing U.S. bonds for the year is also inaccurate; the actual maturity of U.S. bonds is even higher. The maturity scale for U.S. bonds in 2025 is $10.8 trillion. This is slightly higher than last year's $10.6 trillion, but overall it remains stable.
So how did the rumors in the market come about? It is likely that these institutions, which fundamentally do not understand the situation, directly used the maturity data displayed on Bloomberg terminals. This data does not account for the debts that have already been repaid in previous months, making the outstanding bonds from past years appear very small in the data pulled by these institutions, while future debts seem large, even though they are actually averaged out each month.
Does this mean there is no crisis for U.S. bonds? Not at all. Throughout the second to third quarters, the U.S. is likely to fall into a liquidity crisis, but the reasons behind this are far more complex than just the maturing U.S. bonds mentioned earlier. There are three reasons behind this.
The first reason is that everyone really should pay attention to corporate bonds in the United States. During the pandemic, due to extremely low interest rates, most companies were able to borrow long-term debt at relatively low rates quite easily. Now, a significant portion of this debt is maturing, with the amount due being over four times the usual level, which could likely trigger a sell-off in the market, potentially leading to a liquidity crisis similar to the 2008 subprime mortgage crisis. Of course, the Federal Reserve is likely to intervene again at this time.
The second risk point is the debt ceiling of the United States, meaning the borrowing limit for the U.S. Treasury is set to expire this August.
In July this year, the U.S. Congress is likely to approve an increase in the debt ceiling again. After the increase, the U.S. Treasury will rush to issue bonds, absorbing excess liquidity from the market, leading to a cash crunch for banks.
The third issue is that global financial markets are experiencing a phenomenon of fleeing the U.S. market, known as the U.S. exception theory collapse, which previously led to a triple whammy in stocks, currencies, and bonds. Last Friday, Moody's downgrade of the entire U.S. credit rating raised a significant question mark over U.S. credit.
In the past two days, we've seen a small-scale triple whammy in U.S. stocks, currencies, and bonds due to the two reasons mentioned above, which could likely trigger a liquidity crisis! It is crucial to closely monitor the bond credit spread indicator in the U.S.
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