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Proshares Ultrashort Lehman 20+ Year Treasury (TBT)

Too Much Debt for T-bills to Escape

By Tobin Smith

All the borrowing is putting a pinch on Treasury bonds. Instead of issuing $125 billion this quarter, the number is now $494 billion and then even more every quarter thereafter. The U.S. Treasury has to borrow trillions to provide the stimulus cash and cover the spending-to-tax-collection deficits with tax receipts down $88 billion in Q4 and more than $150 billion in Q1 2009 as quarterly estimated taxes and corporate taxes fall off a cliff.

TBT bets against the 20-year Treasury bill, and as it becomes clear just how much new treasury bond issuance is hitting the tape over the next few months, 10-year bonds will return to the 3.75% to 4% rates they held only six months ago.

An investment in TBT under $46 puts you in line for a double to $100 when the next $2 trillion in new debt hits the market during the next 12 months.

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