Mining Sector Ideas

[gfp927z]

Bigworld, Concerning that repo market news (previous post), the Fed will soon be easing back on the current QT policy, with the monthly QT being reduced from $60 bil to 30 bil (see below). So even if there are no % cuts until later in the year, the reduction of QT provides some added liquidity to the system.

But since the longer term Treasury auctions have not been going well, they are reportedly "shifting to financing America’s deficit mostly with short-term debt". Not being able to sell longer term bonds does sound ominous. With my own Treasury bond allocation, I only went out 2.5 years (to Dec 2026), in part because the US debt monster is growing so fast, and might conceivably reach 40 trillion by late 2026. Fwiw, I figure that is the debt level (40 trillion) where the growing debt bomb could really become a problem, so my tentative strategy is to have the bond allocation much reduced by 2027. I figure the major problems start as the US debt moves from 40 ---> 50 trillion. But what to use instead of bonds? Hard assets, real estate, commodities would be the logical place, as you have already done.



>>> “We’ve been losing liquidity as people and companies pull out money to pay taxes,” said Thomas Tzitzouris, head of fixed-income research at Strategas. “We’re in a bit of an air pocket that’s letting the bond market float more freely and yields rise.”

One line of support is likely to come from the Fed. Minutes from the Fed’s March meeting, released last week, showed that policymakers are looking to slow the pace of running down the central bank’s large holdings of bonds accumulated to prop up the economy. They would likely reduce the rate at which they let Treasurys mature to $30 billion a month, half of the current $60 billion pace.

Balance-sheet runoff, known as quantitative tightening, is meant to drain the banking system of reserves and increase the market’s share of the sovereign-debt pile. With the Fed paring back that program, and prepping to stop it sometime in the future, investors will have to absorb a smaller net share of Treasury securities. That could support bond prices and remove some upward pressure on yields. <<<

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