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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:

 

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Tue, 07/12/2011 - 11:54 | 1447900 SheepDog-One
SheepDog-One's picture

Unreal, herds of elephants stampeding circles on the head of a pin, mad scramble to lock in negative returns better than the next guy in expectation of 'the great debt ceiling miracle' which cant possibly have any good outcome at all. I think more people are realizing we're at the Swan Song stage.

Tue, 07/12/2011 - 12:06 | 1447956 French Frog
French Frog's picture

In a nutshell, if the debt ceiling issue is not resolved by 22 July, what will the likely effect be on:

1) stocks

2) $ index (or €/$ inversely)

3) bond prices (or yield inversely)

Tia

Tue, 07/12/2011 - 12:10 | 1447969 Jim in MN
Jim in MN's picture

None because of the Treasury's "secret plan" to use the Federal Reserve as a broker to continue operations.  Reported as a Reuters exclusive and completely ignored by the media because it is not in the White House or Republican talking points issued to the press.

http://www.reuters.com/article/2011/07/07/us-usa-debt-exclusive-idUSTRE7...

 

Tue, 07/12/2011 - 12:10 | 1447970 SheepDog-One
SheepDog-One's picture

Its a trick question, there is no way to resolve the debt ceiling issue. They can try some lies, kick the can a couple more feet....but is anyone believing it?

Tue, 07/12/2011 - 12:21 | 1448006 augie
augie's picture

...but is anyone believing it?

I'd venture a guess that If their paycheck has U.S. treasury stamped on it, they probably still believe. 

Tue, 07/12/2011 - 12:32 | 1448021 White.Star.Line
White.Star.Line's picture

Something to add to the nutshell.
If the debt ceiling is not increased/budget deal done by July 22, other likely effects are:
1) The further pilfering of retirement funds can continue.

2) A "compromise" deal will have to be hastily assembled due to the down-to-the-wire impasse, and budget will finally pass, increasing the debt ceiling, with tax breaks protected, and assistance programs gutted.

3) More time for bankers to assemble their wish list, for when austerity comes to US shores.

3

Tue, 07/12/2011 - 11:54 | 1447913 TruthInSunshine
TruthInSunshine's picture

OT, but somewhat relevant (actually):

This is like sell side analyst speak, where a 'strong buy' recommendation means "flip a coin and take your chances," a 'buy' means "you're on your own," a 'hold' means "wtf bro, you crazy?," and a sell means "we never, ever recommended that stock, did we?" -

 

 

Translation: Applied Materials says hunker down because there's a shit storm, Category 5, ETA soon.

Tue, 07/12/2011 - 11:57 | 1447922 spartan117
spartan117's picture

Maybe Moody's will downgrade Italy to scare people into those 3 years?

Tue, 07/12/2011 - 12:02 | 1447945 slaughterer
slaughterer's picture

Moody's--a bear's best friend these days.

Tue, 07/12/2011 - 12:01 | 1447937 Johnny Lawrence
Johnny Lawrence's picture

UBS jumps on the gold train:

Gold: The only safe haven out there

Sovereign debt problems in Europe and the US and high inflation
in emerging markets keep the structural outlook for
gold bright.

Gold is an outright buy from a diversification perspective. We
target a move to USD 1,650/oz with price spikes above.

In the current period of elevated uncertainty, gold remains the
ultimate currency. Investors realize that holding cash significantly
erodes their purchasing power as inflation remains a concern. Investment
demand for the inflation-protection qualities of gold is
likely to stay strong. Gold is an outright buy for market participants
fearing an outbreak of the European debt crisis. From a chart-technical
point of view we recommend to go long gold below USD
1,500/oz.

Tue, 07/12/2011 - 12:01 | 1447938 FranSix
FranSix's picture

C'mon.  Everybody knows what happens next.  The debt ceiling gets passed after acrimonious and bitter debate, then word gets out right after that the gub'mint borrowed more money than they actually stated.  

Tue, 07/12/2011 - 12:04 | 1447952 slaughterer
slaughterer's picture

Debt ceiling will get passed, otherwise "financial Armeggedon" (Larry Summers today, taking a trope from the Hank Paulson phrase book). 

Tue, 07/12/2011 - 12:06 | 1447955 TruthInSunshine
TruthInSunshine's picture

Complete with Martial Law & Tanks in the Streets, too?

Just like 2008?

Wow. Thank God for Larry Summers. That proud Patriot!

Tue, 07/12/2011 - 12:09 | 1447964 Josh Randall
Josh Randall's picture

Exactly - and we get right back to Geithner reversing himself by saying that his "Great Recession" reference was a misnomer and that things are Bullish so you need to re-elect a certain illegal alien

Tue, 07/12/2011 - 12:12 | 1447976 SheepDog-One
SheepDog-One's picture

Borrowed from who?

Tue, 07/12/2011 - 12:51 | 1448105 JuicedGamma
JuicedGamma's picture

BennyBucks?  You need to believe in qe3.

Tue, 07/12/2011 - 12:06 | 1447954 Jim in MN
Jim in MN's picture

Need new scary chart: US-General Collateral spread, or U$B$-spread.

Tue, 07/12/2011 - 12:09 | 1447962 slaughterer
slaughterer's picture

High beta momo in a holding pattern today.  Algos just scalping this entire asset class like they did C before the split.  Only stable trade on the screen: leveraged long oil. 

Tue, 07/12/2011 - 12:46 | 1448080 TooBearish
TooBearish's picture

More like Bill market knows theys a huge backlog of issuance coming they way the minute Bam Bam signs the new debt ceiling - Timmeh has about 500 billion to issue in the next month....

Tue, 07/12/2011 - 13:05 | 1448154 slaughterer
slaughterer's picture
Not very much to read in these tea leaves: Results of USD 32bln 3y note auction FIXED INCOME

- Yield 0.670% vs. Exp. 0.680%
- B/c 3.22 vs. Avg. 3.21 (Prev. 3.28)
- Indirect 34.5% vs. Avg. 32.83% (Prev. 35.63%)
- Allotted at high 31.73%

Tue, 07/12/2011 - 13:53 | 1448375 Urban Redneck
Urban Redneck's picture

They had to payto hold US fiat for 4 weeks with Europe in meltdown, that is a rapidly decaying half-life of the US's flight to safety status.

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