🚨 Something is brewing in the U.S. financial system, and it’s not good.
The latest Treasury auction was a flop. The government tried to sell $18B in bonds… and had to buy back $10B of its own debt. That’s over 55% of the auction left on the table.
Let that sink in: the issuer became the buyer.
This isn’t a one-off either. It follows another failed auction earlier this year. Demand is drying up—fast.
And what’s the government’s solution?
Not to cut spending. Not to slow issuance.
But to rewrite the rules so that banks are forced (or “incentivized”) to buy Treasuries.
Regulators are preparing changes to the Supplementary Leverage Ratio (SLR)—a key capital rule—to exclude Treasuries and reserves. Translation? Banks wouldn’t need to hold capital against mountains of U.S. debt, giving them more room to absorb the government’s problem.
This isn’t policy innovation—it’s a canary in the coal mine.
It’s a quiet admission that the natural buyers of U.S. debt are tapped out. Foreign central banks are stepping back. Private markets are demanding higher yields. And now… the U.S. is turning inward, pressuring domestic banks to keep the machine going.
This is how debt spirals form.
Issue more.
Nobody shows up.
Rewrite the rules.
Push the debt internally.
Repeat.
If this were happening in another country, we’d call it a crisis in the making.
Here? We call it a Tuesday.
#BeginningOfTheEnd
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