The United States Treasury announced yesterday that it will reducing monthly bond sales by $3 billion amid signs that this years borrowing requirements will be lower than forecast.

The Wall Street Journal reports as follows :

NEW YORK (Dow Jones)–The government’s plans to slim down its record-sized auctions leave bond market bears with a weaker case for higher rates, as they help to ease worries that Treasury supply could surpass demand as the economy improves.

That’s good news for the broader economy as Treasury yields are benchmarks for mortgage rates and other borrowing costs for consumers and companies. It also helps the government keep its interest costs low.

Treasury Wednesday said it will cut its auction sizes for next week’s three-year and 10-year sales by $2 billion and $1 billion, respectively.

FT Alphaville on the same piece :

What’s this? Could this be some good news on the sovereign debt front, for once? It surely can.

On Wednesday the US Treasury quietly announced it would be cutting back the size of its bond auctions, from $81bn in February to $78bn next week. That’s the first reduction since May.

It’s a small drop, we know, but it is something of a reversal.

I find it interesting how the news that the US will only borrow $2.3 trillion rather than $2.4 trillion can be described as anything other than utterly shocking.

RBC Capital Markets – emphasis mine :

The Treasury Department has decided to start the process of easing back on auction sizes with the coming quarterly refunding auctions. It will now issue $2b less on the 3yr (total size of $38b) and $1b less on the 10yr (total size now $24b). The bond was left unchanged. We had been talking about this idea for months now, based on the improvement in tax receipts. While we thought the timing of reductions would be a couple of auctions from now, the fact is, in terms of our overall gross coupon issuance for the calendar year, we think the changes are rather modest. Leading into the year, we thought gross coupon issuance would total about $2.4t. After making some adjustments and accounting for gradual decreases over the balance of the year (as the Treasury suggested), our estimate now sits at about $2.3t

I think the lack of reaction to the size of those numbers, even when revised down by $100 billion, is entirely due to how incomprehensible the actual amount of money they represent is.

Take just $1 trillion and a little thought :

Let say that you were extremely lucky and won the Goldman Sachs lottery jackpot of $1 trillion. You are 20 years old and cannot be bothered to invest the money as you are content just to spend the capital over your lifetime.  Now you have money and assuming, of course, that you don’t overdo the Columbian marching power, fast cars and loose women celebrating your new found wealth, you should live a fair while – lets say until the age of 80.

Now, to get through this amount of money over the 60 years you have to spend it, you will have to spend $31709.79 every single minute of every day to get through it!

Feel like sleeping and doing other things than shopping occasionally? Well you only need to spend $320.5 million every week – should be easy for a while but when you own half the islands in the world after a few months, what do you do then?

As you can see, these sums are mind bogglingly huge and that $1 trillion is less than half the borrowing for this year by the US alone. How anyone can either call this good news or pretend that the whole thing is sustainable is beyond me.