T Bills and Other Gemlets

January 24th, 2014 11:34 am | by John Jansen |

There has been some odd trading in the one month T bill this morning. That bill closed yesterday at one basis point and has traded as cheap as 15 basis points this morning. The trade at 15 basis points I am told was odd lottish but traded chunky size at 9 basis points. The bill is currently at five basis points. The dealer with whom I conversed said that at first it appeared to be central bank selling but now he leans to the conclusion that some are concerned once again about the debt ceiling. Jack Lew wrote a letter to Congress and informed the legislative solons that a breach of the debt ceiling was now likely in February rather than some time in March as earlier forecast. Theoretically that would put the one month bill at some risk of not being repaid. In addition, Politico.com has a story from Senator Patty Murray (co architect along with Rep Paul Ryan of the recent budget deal) that there would be no negotiations on the debt ceiling. I think that most serious commentators understand that and given that the Lew letter was out earlier this week this whole mini imbroglio is silly.

Separately, I have heard of end user selling in off the run 10 year paper and receiving in the swap curve belly by hedge funds. That same crowd is paying twos.

 

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