Shortage of Teasury Bills forces investors into longer term securities

Discussion in 'Wall St. News' started by ASusilovic, Nov 14, 2011.

  1. The market for U.S. Treasury bills is poised to shrink the most since early 2010, creating a shortage in the debt and helping keep government borrowing costs near record lows.

    The Treasury Department will issue about $72 billion less debt due within 12 months than it retires in December and January, bond strategists at New York-based JPMorgan Chase & Co. estimate. The contraction partly reflects a surge in corporate tax receipts that the Treasury receives this time of year, lessening its need to borrow.

    The shrinkage underscores a shift in the financing strategy of the government, which boosted bills outstanding to a record $2.07 trillion in August 2009 as it raised cash to bail out the nation’s banks amid the worst financial crisis since the Great Depression. As those stresses abated, the amount has dropped to $1.48 trillion, or about 15 percent of all Treasuries, the smallest percentage in almost half a century, driving investors to securities maturing in more than a year.

    “People have no choice,” said Eric Pellicciaro, the head of global rates investment at New York-based BlackRock Inc., which manages $1.14 trillion in fixed-income assets. Demand for short-term notes “is expected to remain extremely strong mostly as alternatives to place cash have diminished,” he said in a telephone interview on Nov. 10.
    Record Bids

    Last week’s auction of $32 billion in three-year Treasuries by the government received bids for 3.41 times the amount offered, the highest so-called bid-to-cover ratio since at least 1993, according to data compiled by Bloomberg. The notes yielded 0.379 percent, below the 0.393 percent average forecast in a Bloomberg News survey of eight of the Federal Reserve’s 21 primary dealers.

    Two-year note yields were 0.24 percent at 12 p.m. in Tokyo, based on Bloomberg Bond Trader prices. The price of the benchmark 0.25 percent security due October 2013 was little changed at 100.

    Rates on three-month bills ended last week at 0 percent, and were unchanged today,
  2. ?'s almost time for a tightening cycle? :confused: :eek:
  3. so investors lock into 3 years notes to get 1 % interest for 3 years
    and with inflation running at least 2-3% by official numbers they agree to lose 6-8% as a minimum in real term during those 3 years!

    I understand there are no visible alternatives but it's insane!

    although very good for government finances
  4. C6H12O6


    Take a look at the german yield curve

    0.2% 1Y
    0,45% 3Y
    1,8% 10Y
    inflation 2-3%

    This should be enough to understand why every single day of the week, Merkel or some a*hole at the Bundesbank comes out saying ECB bond purchases are limited, etc etc
  5. = Deflationistas! :D
  6. Daal


    You are still waiting for that?Its too bad the Fed has shutdown the Fed futures game with their 2013 pledge, it was a nice run!
  7. zdreg


    the chinese don't have enough of this paper to sell to eager buyers. what a grand opportunity to get out of wallpaper.
  8. 1) One of these days I'll be "right" :p
    2) Would you do the same trade in deferred eurodollar futures? :confused:
  9. Daal


    no, I don't like libor risk. point is, bernanke told everyone what he is doing, even my mom knows how to price FF now