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Dislocation alert: 4-week t-bill auction yielding 1.30% today

By justme following x   2017 Sep 5, 11:05am 1,821 views   12 comments   watch   sfw   quote     share    


Note that 1.30% is *above* the FRB (Fed) 1.00-1.25% target range, and also a big jump from the 0.96% yield at the previous auction just a week ago. Neither the mainstream news media, nor bloggers, have picked up on this as of this moment. Discuss! Why did this happen, and what are the implications?

Latest auction results:
https://www.treasurydirect.gov/instit/annceresult/annceresult.htm

Specfic results for today's auction
https://www.treasurydirect.gov/instit/annceresult/annceresult_query.htm?cusip=912796LW7

It should also be noted that the yield for the 4-week t-bills came in HIGHER than for the simultaneous auctions for 13-week and 26-week t-bills, who came in at 1.020% and 1.115%, (unchanged from last auction). This is a local inversion occurring at the shorter end of the yield curve.
1   justme   ignore (0)   2017 Sep 5, 11:34am   ↑ like (0)   ↓ dislike (0)   quote        

For lack of a better explanation, I would speculate that this dislocation is caused by someone needing a significant amount of short term funds (~cash) for other purposes, and therefore not parking the funds as t-bills.Exactly what is going on remains to be explained.
2   NuttBoxer   ignore (2)   2017 Sep 5, 11:42am   ↑ like (0)   ↓ dislike (0)   quote        

Insiders getting out of the bond bubble...
3   justme   ignore (0)   2017 Sep 5, 11:42am   ↑ like (0)   ↓ dislike (0)   quote        

There is is also a huge spike up in the VIX ("fear index") today, up 27.54% as of this writing.
4   NuttBoxer   ignore (2)   2017 Sep 5, 11:45am   ↑ like (0)   ↓ dislike (0)   quote        

And DOW dropping 200 point, almost all at opening. Volatility is a sign of strength no?
5   justme   ignore (0)   2017 Sep 5, 11:58am   ↑ like (0)   ↓ dislike (0)   quote        

ZH now has posted that the spike in interest rate is because of debt ceiling uncertainty, which could lead to a "technical default". I guess Technical Default can be described as "we are creditworthy, but we refuse to borrow more to pay you".

http://www.zerohedge.com/news/2017-09-05/debt-ceiling-turmoil-4wk-bills-price-highest-yield-sept-2008-technical-default-fears
6   APOCALYPSEFUCKisShostikovitch   ignore (32)   2017 Sep 5, 12:42pm   ↑ like (2)   ↓ dislike (0)   quote        

If you're not shooting by now, you're DEAD!
7   CBOEtrader   ignore (2)   2017 Sep 5, 1:52pm   ↑ like (1)   ↓ dislike (0)   quote        

from these depressed levels, a mini uptick like this isn't abnormal. it is however noteworthy, especially if the trend continues. vix at 12 and yields at 1.3% are still both crazy low.
8   NuttBoxer   ignore (2)   2017 Sep 5, 4:57pm   ↑ like (0)   ↓ dislike (0)   quote        

Day-to-day warbles are anyone's guess, but looking long-term, this is all that matters.

"Including this year [as of 2 September], gold has risen in 14 of the past 17 years at a 9.4% compound annual rate, far surpassing returns from stocks."
-Fred Hickey "The High-Tech Strategist
9   PeopleUnited   ignore (2)   2017 Sep 5, 6:23pm   ↑ like (0)   ↓ dislike (0)   quote        

APOCALYPSEFUCK_is_ADORABLE says
If you're not shooting by now, you're DEAD!

You're adorable.
10   HEY YOU   ignore (7)   2017 Sep 5, 8:37pm   ↑ like (0)   ↓ dislike (0)   quote        

APOCALYPSEFUCK_is_ADORABLE says
If you're not shooting by now, you're DEAD!


I didn't hear the discharge of the bullet when fired.
11   Patrick   ignore (0)   2017 Sep 5, 9:38pm   ↑ like (2)   ↓ dislike (0)   quote        

justme says
It should also be noted that the yield for the 4-week t-bills came in HIGHER than for the simultaneous auctions for 13-week and 26-week t-bills, who came in at 1.020% and 1.115%, (unchanged from last auction). This is a local inversion occurring at the shorter end of the yield curve.


I think an inverted yield curve means that people are afraid that longer term rates will fall, and therefore if they tie up their money in a short term bond now, they will lose out when they have to re-invest and the longer term rates have gone lower in the meantime.

So it would seem to indicate that people believe interest rates will fall within 13 to 26 weeks.
12   justme   ignore (0)   2017 Sep 8, 3:19pm   ↑ like (0)   ↓ dislike (0)   quote        

Patrick says
I think an inverted yield curve means that people are afraid that longer term rates will fall,


Interesting thought, but in this particular case I lean toward an explanation along the lines of Zerohedge (above): Investors were concerned that there might be some defaults in relation to the debt ceiling problems, and therefore any USG debt maturing around the time of the debt ceiling limit being reached would be at risk for default of both principal and interest. Longer term USG debt would be at risk for interest payment default, but not principal repayment default, since technically the principal would not be due (yet).

What is interesting is that the FRB did NOT step in and "buy" (accept as reserves) the 4wk t-bills in sufficient quantity to suppress/avoid the observed jump in interest rate. That is after all what they have been doing ever since 2008, and is their stated policy with a target range of 1.00-1.25% right now.




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