Debt

The federal debt as at 31-12-2009: Amount, structure, domestic and foreign financing

The financing structures are unsurprising

The balance sheet of the US financial debt this month covers changes in the gross federal debt, the structure of its financing, US and foreign buyers of US treasury bills.

There is a time lag between the debt data as at 31/12/2009 and the financing of the latter, which are published two to three months late by the FED and the Treasury.

We give a brief comment by presenting only the essential technical data. This post can be read in connection with two posts dedicated to the financing of the FED, they allow to paint a complete picture of the American public debt.

We will soon give a summary table of the US public debt (EDF and Treasury) and parapublic (GSE Fannie Mae, Freddie Mac et al.) At the beginning of 2010.

As a reminder, the gross debt does not take into account the assets of the Federal State, which are around $ 600 billion. The existence of these assets – not very liquid – does not have a considerable importance. Gross debt is, therefore, a more important indicator than net debt.

A – Developments in the public debt

The US federal debt regains extremely sharp growth rates at the end of 2009. If the month of October had been able to hope for a break, the increase in debt is in line with the months of strong growth in 2009. The federal debt in November, it stood at $ 198 billion in December. The financing needs of the US Treasury, therefore, remain massive.
The only originality of this month of December resides in the positive role of the surpluses of the funds and trust funds. These funds provided a surplus of $ 100 billion in the last month: over a year, the federal government managed to draw nearly $ 200 billion from it.

Funds and Trust Funds have resulted in a relaxation of Treasury pressure in the US and international financial markets. The latter was punctured in December that of $ 99 billion. This relief should not last; as shown by the Treasury’s financing curve for funds and trust funds, their contribution to covering the Treasury’s needs is not extensible at will. As of January 2010, the Treasury will need to call again – and for very large volumes of capital – the financial market that has until then responded present.

B – The financing structures of a consolidated debt

Bills of less than 1-year maturity continue to lose weight in debt financing. This is a sign that the Obama administration is firmly committed to consolidating the Treasury debt. Sensitive since the end of the Bush administration, this consolidation is characterized by the growing importance of ratings (maturity of 2 to 10 years) in the financing of the federal debt.

Two conclusions can be drawn from this consolidation policy. The growth of ratings and the decline in Bills indicate that the Obama administration’s spending policy will remain strong in 2010. Does the state of the US economy leave another perspective?

For the record, let us recall what contrasts the Obama administration’s new policy with that of the Bush administration. The Bush administration never wanted to ask the question of trust to investors, it financed the explosion of the debt of 2008 by short credits from July-August 2007. In 2009, the policy of consolidation of the debt of the Obama administration has been all the more pressing. It was impossible to sustain the record-breaking increase in US financial debt in 2009 without giving it a solid and sustainable foundation. This has been the role of debt consolidation, which raises serious questions about the sincerity of its accounts – not to say the honesty of its methods. Is the stability of interest rates on treasury bills throughout 2009 not questionable?

Be that as it may, we will still note an increase in long-term financing in the payday loan consolidation of US debt. The progression of the Bonds (maturity of 14 to 30 years) still retains a modest role that barely follows the general curve of the increase in the total debt of the federal state. As for TIPS, the principal of which is indexed to inflation, the Treasury continues to play a very faded role because of the inflationary risk represented by the deteriorated balance sheet of the FED and the increasing debt of the Treasury. Finally, the portion of the federal debt, consisting of non-marketable treasury bills, continues to decline.