US Roll Risk Reduced?

Look at this. Since the US doesn’t have the capacity to pay back our debt, it is very important that we can refinance it once it becomes due. The amount of debt due within one year has decreased from last year. That means that we have a bit more time to figure out what to do with ourselves. In two, three, four, etc. years, we have bigger problems. But, this year looks better than last. The validity of that statement is subject to one big caveat, that the risk of an interest rate spike is the same as last year. That is probably not the case. It’s unfortunate too, because it doesn’t look a whole lot better, just a little bit better. We have slightly less debt to roll over this year, a threat from China that they want to dump our debt to “punish Washington” (follow up is better for Treasuries and bad for everything else), and more debt to roll every year for the near future.

In three months, it will be obvious in retrospect whether China decided to dump Treasuries, risky assets, both, or neither. How serious are we supposed to take Chinese threats?

There’s one additional factor in roll risk. In the past, there was one buyer who grew every year and had no problems buying debt. That buyer was the Social Security Trust Fund. That buyer just switched into a net seller. Without a rebound in employment, it won’t switch back to being a net buyer.

(January treasury data here)