troublesome t-bills

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Last night’s four week US T-bill auction result was a little odd.

The auction of US$30bn of four week paper was well enough covered (~83bn of bids v. ~30bn of paper), however the results reveal a fairly large change of sentiment.

Typically, these bills are better than cash, and so trade at a lower yield than the overnight fed funds rate — however there was no-one willing to bid below fed funds at this auction (the low bid was 15bps, the median 25bps and the high bid 35bps).

usTbillsA lower 3m rate relative to the 1m rate suggests that the `market` thinks this will be temporary, however the fact that this yield spike has been larger than the similar spike in 2011 (when we last had a debt ceiling debacle) suggests to me that there’s a little less confidence in a solution this time (note the data is from FRED, with today’s closes from Bloomberg as FRED is one day behind).

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