4 Week Bill Prices At 0.02%, Highest In Six Weeks As General Collateral Remains Negative

Tyler Durden's picture

The Treasury just auctioned off today's $28 billion 4 week Bill. Details of the auction were expected by the investor community to see what the closing yield on the auction would be. And at 0.02% it probably shouldn't be very memorable. Yet it is, because this just happens to be the worst yield in over a month (and certainly a deterioration from the free money the Treasury was able to get during the last 4 week bill which closed at 0.000%). The last time we had a 4 Week Bill price wider than this high yield was June 1, when the auction priced at 0.04%. Now is this micro move indicative of much? Probably not, although it does show that the quarter end window dressing phenomenon was not responsible for the surge in Bill demand (the prior auction was July 6 or after the Q2 end period), and that is now over. Also, demand for General Collateral is as high as ever at -0.01%, thus this is not an aversion from short-term paper. So is the money scrambling into equities? Hardly. This begs the question: is this micro move in ultra short term yields, the first canary in the coalmine from the bond market which may, just may, be getting a little nervous that there won't be a resolution to the debt ceiling issue by the July 22 deadline. We will know for sure next week when the next 4 week Bill is auctioned off. In the meantime, later today we get the first test of QE2-less demand when $32 billion in 3 Year bonds are auctioned off.

Today's auction:

And General Collateral, back at negative: