This page has been archived and commenting is disabled.

Dispersion Between Pre- and Post-"Default" Cash Management Bills Hits 11 bps

Tyler Durden's picture




 

Yesterday we reported of a dramatic dispersion between the just maturing July 28 Bills and the "post default" August 4th version of short-term funding. We also suggested that this is probably a spread that should be promptly collapsed as in the very unlikely event there is a default, the last thing on your counterparty's mind will be trying to collect the several MMs owed to him. Well, the July 28s matured today, and the spread appears to have evaporated. Not so fast. Those who so wish, can still put on the compression trade, although not using plain vanilla bonds, but CMBs instead. In fact, as of today, traders can capitalize on the Treasury's D-Day, with the spread between the August 2 and August 4 CMBs rising from 5 bps to 11 bps in 2 days. Now the reason why this trade, with lots of leverage would be ideal, is that, as mentioned above, if the US does default, Repo desks and Prime Brokers will have much muich bigger problems, and two, as we pointed out, it will imminently become "uncovered" that the Fed has a secret stash of cash, up to the amount of about half a trillion, which may easily carry the Treasury through the new year, in which case the spread will immediately collapse. Of course, we could be wrong, and everyone who plays the compression will blow up in an epic supernova that will make Boaz Weinsten's legendary basis trade annihilation seems like amateur hour.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Thu, 07/28/2011 - 21:38 | 1502984 Ahmeexnal
Ahmeexnal's picture

politicians will most likely have already hedged accordingly.

they will reap millions while the sheeple starve.

Thu, 07/28/2011 - 21:50 | 1503000 Pure Evil
Pure Evil's picture

 

 

Why do I get the feeling this is Tyler's bread and butter.

Fri, 09/30/2011 - 07:13 | 1725147 rossi
rossi's picture

hey buddy,this is one of the best posts that I’ve ever seen; you may include some more ideas in the same kamagra theme. I’m still waiting for some interesting thoughts from your side in your next buy viagra post.

Fri, 09/30/2011 - 07:52 | 1725223 rossi
rossi's picture

Your blog has some of the most fascinating viagra without prescription information! I've read several pages here and I just had to comment and let you know that I thought you've been doing a great job here. Keep it up!

Thu, 07/28/2011 - 21:59 | 1503017 zerohandle
zerohandle's picture

Any way to play this using ETFs?

Thu, 07/28/2011 - 22:09 | 1503036 caerus
caerus's picture

if you want to short 7-10s check out TBX

Thu, 07/28/2011 - 23:06 | 1503147 a_ext
a_ext's picture

Uhh lol, these are used for like 7-10 days.

Thu, 07/28/2011 - 23:09 | 1503152 caerus
caerus's picture

uhh..lol..like totally...for sure...

Thu, 07/28/2011 - 23:30 | 1503149 zerohandle
zerohandle's picture

Thx

Thu, 07/28/2011 - 22:07 | 1503031 RiverRoad
RiverRoad's picture

 Aug. 15, 2011 marks the 40th anniversary of Tricky Dick's removal of gold backing the dollar.  And thanks for sicking China on us, too, while you were at it.  Hell of a guy.

Thu, 07/28/2011 - 22:59 | 1503037 caerus
caerus's picture

may he rest in piss

ok may he rest in peas...i guess you enjoy your government stealing your childrens money...gratz

Thu, 07/28/2011 - 22:14 | 1503046 Pure Evil
Pure Evil's picture

That just goes to show ya how far back they've been planning this fiasco.

Thu, 07/28/2011 - 22:31 | 1503097 chump666
chump666's picture

yeah the fed will have to pump hard to send yields down on a default/not default, yeilds are still going up and USD is sell.  Stocks who knows, maybe flat trade.  but once LIBOR and CDS spreads from EZ start to widen again, which is around about now. For me it's short EZ indexes, short Asia.  August Sh$tstorm is about to hit.  Debt markets are going to BLOWUP

Thu, 07/28/2011 - 22:37 | 1503115 buzzsaw99
buzzsaw99's picture

This whole thing is staged in order to create trading opportunities for the squid.

Thu, 07/28/2011 - 23:29 | 1503196 natty
natty's picture

Reports are coming out on several undrafted rookies being signed by the Seattle Seahawks. As reported earlier, the most significant is Jeron Johnson, whom many had a fourth round draft grade for until a hamstring injury smacked his draft stock. Also signed this was cornerback Jesse Hoffman out of Eastern Washington. If you follow High School sports avidly, you should know Hoffman holds virtually every state rushing record and finished with a combined 50 touchdowns on offense and 5 interceptions on defense during his senior season. He is small for a Carroll cornerback, and may be converted to safety. Jesse Hoffman will wear Custom NFL Jerseys and play for Seattle Seahawks next season. You can log on our Yahbooks Online Minnesota Vikings Jerseys and select our best quality Vikings Jerseys but Steelers Jerseys if you are true fans of Seattle Seahawks.

Fri, 07/29/2011 - 00:57 | 1503457 ml8ml8
ml8ml8's picture

WTF is that all about?  Are those guys going to be pledged as collateral like Cristian Ronaldo?  If not, take that bullshit to the ESPN website.

Fri, 07/29/2011 - 03:42 | 1503637 qing
qing's picture

removed content (spam)

Wed, 09/14/2011 - 03:52 | 1667138 chinawholesaler
chinawholesaler's picture

Wholesale Calculator
Wholesale Pin

Wholesale Puzzle
Wholesale Gift Bags
Solar Products

Fishing Supplies
Silicone Products
Medicine Instrument

Wholesale Fan
Wholesale Kitchenware
Wholesale Mat

Cleaner Products
Wholesale Thermometer
Wholesale Vuvuzela

Home Appliances
Wholesale Memory Card
Poncho Raincoat

Reflective Safety Vest
Giveaway Material
Wholesale Sticker

Money Bank
Wholesale Keyboard
Wholesale Speakers

Wholesale Binoculars
Bottle Opener
Baby Products Suppliers

Promotional Items
Mouse Pad
Wholesale Scissors

Wholesale Thermometer
Automotive Products
Wholesale Glove

Wholesale Wallet
Vocal Concert Products
Wholesale Bangle

Lighting Products
Flash Gift
Writing Instrument

Arts Crafts
Wholesale Tag
Wholesale First Aid Kit

Wholesale Cards
Electroluminescent
Entertainment Supplies

Wholesale First Aid Kit

Sun, 09/18/2011 - 07:20 | 1681565 nickadam
nickadam's picture
Info  PR: n/a  I: 54,900  L: wait...  Cached: wait...  I: error 999  L: 0  LD: error Links: 46(2)|97(1) Density

Hey I am so glad I home and gardening found your website, baby products I really found you beauty products by mistake, while cheap books online I was browsing on Digg for car and motorbike something else, buy Classical Music Anyways I am here shop clothes online now and would just computer online store like to say thank computer and video you for a marvelous buy tools post and a all round DIY & Tools thrilling blog buy DVD online (I also love buy electronics online the theme/design), groceries online shopping I donâ t have health & beauty products time to browse it jewelry online all at the moment kindle store but I have book-marked kitchen shop it and also lighting products included your RSS feeds, katy perry firework mp3 download so when I have buy music instruments time I will be back office products online to read a great Shoes & Accessories deal more, Please do keep buy cheap software up the awesome toy stores online work. buy vhs online / buy a watch / Pet supplies

Do NOT follow this link or you will be banned from the site!