Trudeau, ASMR Demon From Hell, Slitheringly Resigns As Debt Fast Kicks In

Faced with the choice of converting all my gold and silver to Bitcoin and listening to Trudeau talk for an hour...it's worse than Sophie's Choice.

• T-Bills outstanding have decreased by $203B, limiting cash investment options until the debt ceiling is raised, affecting liquidity conditions.

• Bank reserves could rise temporarily as money moves out of RRP, but will surely drain rapidly once the debt ceiling is resolved.

• $360B in Treasurys are being auctioned this week, potentially breaking yield highs if auctions go poorly, impacting interest expenses and government spending.

• Trudeau's blessed resignation impacts the Canadian dollar, but Canada's monetary situation remains dire and the CAD at final support.

Bills Outstanding Shrink by $203B

According to SIFMA, T-Bills outstanding are down by over $200B, the most in any month in 2024. That's less places to stick extra cash. Bill issuance will be net negative or at best even until the debt ceiling is raised. Still, RRP dollars are gently falling and finding their way into the system anyway, and whatever balances remain in RRP will be insignificant from here.

As for bank reserves, they will bounce back up again as money that was moved into RRP moves back out after the year end turn. Once that's over in 2-3 weeks, money from the Treasury's account at the Fed (which is not bank reserves) will flow into bank reserves as the government spends money from its account without the Treasury sucking money out of the same reserves back into its own account via more debt issuance, because they can't issue more debt because of the debt ceiling.

So following Bloomberg's theory as to what happens now, bank reserves edge higher and higher, simulating liquidity conditions, until the debt ceiling is resolved, which it will ultimately be, and then once it is, all those extra reserves that looked like liquidity are vacuumed out very quickly as the Treasury issues a flood of T-Bills. That is exactly what happened beginning in June 2023 and we saw reverse repos plummeted as a result.

This time, when the debt ceiling is raised, there won't be many dollars floating in RRP to cushion the blow. The dollars will have to come from somewhere though, and