Thread: Treasury Confirms Debt Ceiling Breached; Tap Pension Funds

Treasury Confirms Debt Ceiling To Be Breached Today; Will Tap Pension Funds

by Tyler Durden
05/16/2011 09:45 -0400
334 comments

It's official: the US credit card has officially been maxed out, just as we predicted on Wednesday, http://www.zerohedge.com/article/us-tre ... ilure-time and througout Q1 and Q2. The United States is expected to reach the legal limit on its debt later on Monday and will start dipping into federal retirement funds to give the country more room to borrow, a Treasury official said. As Reuters reports further, The U.S. Treasury will settle $72 billion in maturing bonds on Monday, which will push the country right up against its $14.294 trillion borrowing cap, the official said. To all those who thought only the insolvent government of Ireland will plunder pension funds, our condolences.

Full release (no pun intended):

As US Reaches Debt Limit, Geithner Implements Additional Extraordinary Measures to Allow Continued Funding of Government Obligations

Today, the United States has reached the statutory debt limit. Secretary Geithner sent the following letter to Congress http://www.treasury.gov/connect/blog/Do ... ngress.pdf this morning alerting them to actions that have be taken to create additional headroom under the debt limit so that Treasury can continue funding obligations made by Congresses past and present. The Secretary declared a "debt issuance suspension period" for the Civil Service Retirement and Disability Fund, permitting Treasury to redeem a portion of existing Treasury securities held by that fund as investments and suspend issuance of new Treasury securities to that fund as investments. He also suspended the daily reinvestment of Treasury securities held as investments by the Government Securities Investment Fund of the Federal Employees’ Retirement System Thrift Savings Plan. For more information on these measures, please read this FAQ. http://www.treasury.gov/connect/blog/Do ... %20FAQ.pdf

Last Friday, Secretary Geithner also responded to an inquiry from Senator Bennet regarding the fiscal and economic consequences of failing to increase the debt limit. That letter can be found here. http://www.treasury.gov/connect/blog/Do ... Letter.pdf

Secretary Geithner continues to urge Congress to raise the debt limit in a timely manner in order to uphold the full faith and credit of the United States.

The Honorable Harry Reid
Democratic Leader
United States Senate
Washington, DC 20510

Dear Mr. Leader:

I am writing to notify you, as required under 5 U.S.C. § 8348(l)(2), of my determination that, by reason of the statutory debt limit, I will be unable to invest fully the portion of the Civil Service Retirement and Disability Fund (“CSRDFâ€

$14.3 Trillion U.S. Debt Ceiling Threatened; Silver Bullion Buying Spree In India After Price Falls

Submitted by Tyler Durden
05/16/2011 07:36 -0400
41 comments
From GoldCore

$14.3 Trillion U.S. Debt Ceiling Threatened; Silver Bullion Buying Spree In India After Price Falls

Gold and silver are lower this morning as the recent bout of weakness continues. Equities in Asia were lower on economic growth and inflation concerns and European indices are also lower as Greek debt talks are in disarray after the weekend arrest IMF’s Dominique Strauss-Kahn.


Cross Currency Rates

There are concerns that the IMF’s chiefs’ arrest may delay resolution of Europe’s deepening debt crisis and Greek bonds have fallen again seeing the 10 year yield rise to 15.58% - close to the record highs seen last week.


Greek Government Bond – 10 year (Daily)

Oil prices are lower again on growth concerns despite a significant increase in tensions in the Middle East with clashes on Israel’s borders with Syria, the Lebanon and Egypt.

Gold is likely to find support from geopolitical risk emanating from the tinderbox that is the Middle East.


NYMEX Crude Oil – 5 Year (Daily)

Gold and silver’s fundamentals remain very sound and yet the majority of the western public remain unaware of the fundamentals and unaware of the significant macroeconomic, monetary and geopolitical risk facing them today.

Tensions in the Middle East and North Africa, concerns that Japan is on the verge of a severe recession (due to its earthquake, tsunami and its worsening nuclear catastrophe), risk of sovereign debt contagion in Europe and the U.S. (the U.S. is set to reach its $14.3 trillion 'debt ceiling' this week) and ultra loose monetary policies, currency debasement and inflation are contributing to continuing safe haven demand.

This is especially the case in China and India where strong demand has continued after the recent sell off and where demand continues to surprise analysts and market participants.

The Financial Times reported on Saturday that “the sharp drop in gold and silver prices has stimulated a surge in buying from India in a sign that consumers in the world’s largest gold-buying country retain faith in the decade-long bull story for precious metals.â€

Today's Economic Data Highlights - Debt Ceiling Breach

Submitted by Tyler Durden
05/16/2011 07:27 -0400
18 comments

Lots of data with Empire Index, Capital Flows and the Housing market index on deck, but the biggest news everyone will be waiting for is the predicted debt ceiling breach, which should be formalized at 4:00 pm today.

8:30: Empire Index (May): Slower growth? Several of the regional manufacturing surveys showed signs of slowing in April. Today’s Empire State report—the earliest reading on May activity—could help determine if growth in the sector stepped down again this month.
Median forecast (of 44): +19.7; last +21.7.

9:00: TICS net inflows (March).
Median forecast (of 4): +$32.6bn; last +$26.9bn.

9:00: Federal Reserve Chairman Ben Bernanke on “Innovation, Research, and Development: The Government’s Roleâ€