I continue my short position in the June 2022 Eurodollar future as my best choice for making big money if interest rates surge (which I consider inevitable given the recent rise in inflation combined with the Treasury’s borrowing requirements .) The question is how long can the Fed enable the Treasury able to sell the over $600B each and every month to avoid default and do it at today’s puny rates.

Fed’s current trick of paying the banks to cover the auctions has ballooned the reverse repo market to a record $900B. Can this recent trick be effective for long?

By July 31st Congress needs to vote to raise the debt ceiling. Note that this gives the GOP the chance to ‘use debate to attack deficit spending’.

https://www.bloomberg.com/news/articles/2021-07-01/congress-lacks-clear-plan-to-raise-debt-limit-ahead-of-deadline

Could not such a debate force the Treasury to avoid default by offsetting the reduced appetite of lenders by enticing them in the normal (pre-QE) way- letting interest rates float (ie surge)? And to top it off what if in July Arizona releases a full forensic audit of last November’s election that reveals a vote count making the Biden Treasury’s job even tougher?

What then?

Big Bob the Bond Market (and June 2022 Eurodollar) Bear