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Spread Between July 28 And August 4 Bills Hits 12 Bps, Widest Ever On Default Risk

Tyler Durden's picture





 

As Bloomberg reports, the spread between the July 28 and the August 4 T-Bills, two instruments that mature within a week of each other, and which differ by absolutely nothing else, has just surged to the widest ever, as investors are happy to roll away from long maturity instruments (even if longer maturity in this case means one week down the road) and dump securities that mature after the debt ceiling deadline for fear they will not get repaid. As for what is happening with the August 25 Bill, see second chart below. Yes: the market is starting to price in the unmentionable.

Chart 1: July 28 vs August 4 Bills. Of course, if the deal is done, this spread will collapse, and assuming a few thousand turns of leverage someone may even retire early; On the other hand if the spread blows up, and America defaults, who will be there to collect? Still, nobody seems to be rushing to put it on.

Chart 2: And the Aug 25 Bill. Oops.

 


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Wed, 07/27/2011 - 14:31 | Link to Comment gangland
gangland's picture

 

 

Tyler,

 

could this be the reason?

 

 

"Late Monday, the Chicago Mercantile Exchange, the main center for the trading of derivatives, one of the major forms of financial speculation, announced that it would no long classify short-term Treasury bills as risk-free when used as collateral by traders. The exchange also will require traders to provide larger amounts of longer-term Treasury bonds when using them as collateral.

 

The “haircuts” applied to the value of government securities used as collateral for trades ranged from half a percentage point for Treasury bills to a full percentage point for Treasury notes and bonds, with the changes to take effect on Thursday. (July 28)

 

The CME justified the increases as a response to the greater volatility in the prices of US government securities because of mounting speculation that there will be at least a short-term interruption in US government payments to bondholders."

 

http://globalresearch.ca/index.php?context=va&aid=25800

 

Wed, 07/27/2011 - 14:56 | Link to Comment slaughterer
slaughterer's picture

But, but.... James Grant said the US will not default on his last interview on Bloomberg. 

Wed, 07/27/2011 - 15:00 | Link to Comment I am a Man I am...
I am a Man I am Forty's picture

the US isn't going to default on its debt anytime soon, the assholes in DC are going to have to cut spending and piss their lobbyists off, but the US will not default, not this go round of charades anyway

Wed, 07/27/2011 - 15:03 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

I agree.  They will cut entitlements, and blame each other, but not default on USTs.

Wed, 07/27/2011 - 15:25 | Link to Comment Dr. No
Dr. No's picture

"Never let a crisis go to waste".  Defaulting on debt obligations is too abstract for voters.  Not sending out SS checks is front and center and will allow plenty of political mud throwing for the next election.  Blaming the other party for cutting policemen is far easier than 30 second attack ads about credit rating technical mumbo jumbo.

Wed, 07/27/2011 - 14:27 | Link to Comment mmlevine
mmlevine's picture

The big reset in 3,2,1...

Wed, 07/27/2011 - 14:55 | Link to Comment Robot Traders Mom
Robot Traders Mom's picture

@mmlevine. I agree there will be a reset, but I'm basically just using you to see if anyone can explain if this is just noise, legit, etc. Thanks bro.

http://etfdailynews.com/2011/07/25/investors-the-1-billion-armageddon-trade-placed-against-the-united-states/

 

Wed, 07/27/2011 - 14:27 | Link to Comment No Bid
No Bid's picture

August 4 bills also yield the same as 04/05/12 bills.

 

Someone  out there believes this is more than theater.

Wed, 07/27/2011 - 14:28 | Link to Comment buzzsaw99
buzzsaw99's picture

bills are tbtf lulz

Wed, 07/27/2011 - 14:43 | Link to Comment Raynja
Raynja's picture

Forget tbtf, we are headed strait for tbts- too big to save

Wed, 07/27/2011 - 14:59 | Link to Comment Dr. Richard Head
Dr. Richard Head's picture

I thought TBTS stood for "Timmah and Bernanke - Two Shits."

Wed, 07/27/2011 - 14:30 | Link to Comment Cassandra Syndrome
Cassandra Syndrome's picture

Spread Bitchez

Wed, 07/27/2011 - 14:30 | Link to Comment r101958
r101958's picture

Now the FED will lower the discount rate to -0.25

Wed, 07/27/2011 - 14:34 | Link to Comment lolmao500
lolmao500's picture

Could be. They wouldn't be the first to do it... In 2009 I think, a swiss bank did it. Negative interest rates.

Wed, 07/27/2011 - 14:32 | Link to Comment malikai
malikai's picture

Meanwhile, Casey Anthony mask shatters all semblance of reality for $24,000 on eBay. WTF?!

http://cgi.ebay.com/CASEY-ANTHONY-LATEX-RUBBER-MASK-EXT-RARE-/260823841484?pt=LH_DefaultDomain_0&hash=item3cba4ffacc#ht_500wt_1363

Wed, 07/27/2011 - 14:33 | Link to Comment MonsterZero
MonsterZero's picture

And it'll be worth $240,000 next year.

Wed, 07/27/2011 - 15:00 | Link to Comment Long-John-Silver
Long-John-Silver's picture

Or zero like Beanie Babies after everyone forgets about it 5 minutes after the last news report.

Wed, 07/27/2011 - 14:34 | Link to Comment SheepDog-One
SheepDog-One's picture

We can push Robo's face in some dough and make gorilla cookies.

Wed, 07/27/2011 - 15:00 | Link to Comment Robot Traders Mom
Robot Traders Mom's picture

Listen ZH'ers. My son is a fucking idiot. I get it. He already gets picked on enough at school. Please leave him alone!

Wed, 07/27/2011 - 15:09 | Link to Comment pupton
pupton's picture

It needs a little hole in the mouth...and a surprised expression on her face.

Wed, 07/27/2011 - 14:33 | Link to Comment SheepDog-One
Wed, 07/27/2011 - 14:37 | Link to Comment bob_dabolina
bob_dabolina's picture

We get it. 

You've posted that 50 times. You don't need to bring it up on evey thread.

Wed, 07/27/2011 - 14:39 | Link to Comment Sutton
Sutton's picture

Long Sleepy's as the only safe place to store money is, as our grandparents knew, under the mattress.

Wed, 07/27/2011 - 14:41 | Link to Comment treemagnet
treemagnet's picture

The PPT is gearing up in the ready room for their standard 3:00 EST ride on what I like to call "The Happy Train".....allllllll abooaaarrrrrrrrrd.  I hope that fucking train derails soon (lack of maintenance).

Wed, 07/27/2011 - 14:50 | Link to Comment slaughterer
slaughterer's picture

Choo Choo.  Happy train taking AAPL, NFLX, AMZN et. al.  as passengers right now.   All aboard. 

Wed, 07/27/2011 - 15:26 | Link to Comment fuu
fuu's picture

PPT out of cash right now.

Wed, 07/27/2011 - 14:43 | Link to Comment RobotTrader
RobotTrader's picture

 

 

Wow, dollar is going wild and resource stocks are getting destroyed.

As I predicted an outright default will funnel billions into U.S. Dollars and Treasuries

10-yr. yield still at 2.99%

Wed, 07/27/2011 - 14:46 | Link to Comment Bastiat
Bastiat's picture

As I predicted an outright default will funnel billions into U.S. Dollars and Treasuries

That is a treasure!

Wed, 07/27/2011 - 15:10 | Link to Comment stewie
stewie's picture

Although short term, dumping US Debt whould be dollar positive as mass selling creates dollar shortages.  

Wed, 07/27/2011 - 15:20 | Link to Comment Robot Traders Mom
Robot Traders Mom's picture

Listen son. If you keep making up stupid shit to say, I can't keep defending you from the big kids!

Wed, 07/27/2011 - 15:23 | Link to Comment lieutenantjohnchard
lieutenantjohnchard's picture

you also predicted the collapse of gold and oil. you also graced the board with your "formula" of $1600 gold and 1500 dow predicated on the view that the dow would pull gold up kicking and screaming. wrong yet again. gold went to $1600 alright. but it was because of reasons that you at this late date still fail to grasp.

robottrader: the ultimate dumb money indicator.

Wed, 07/27/2011 - 14:50 | Link to Comment trentusa
trentusa's picture

What's up ya'll what're we talkin' about here oh currency trading I'm trying to brush up on that but the dow's down 200 and my carry trade (intermarket spread short the dollar long gold & wheat) is going gr8!! A total no-brainerYa'll wait hang on a sec My popcorn's ready Ill brb...

Wed, 07/27/2011 - 14:50 | Link to Comment Cdad
Cdad's picture

Well...and as this happens...and everyone on the BlowHorn switches tunes from "a downgrade of US debt is no problem" to "Fuck, we're going to be downgraded!", the S&P has just taken out three moving averages in one session...the 10 day sma, the 20, and the 50.

The last time we did this, the drop was precipitous from there.

I heart Ponzi schemes.

 

Wed, 07/27/2011 - 14:52 | Link to Comment slaughterer
slaughterer's picture

Ride SPY puts all the way till Friday.   This government will keep you hanging on till then. 

Wed, 07/27/2011 - 15:17 | Link to Comment trentusa
trentusa's picture

Yep. Teaching a slave to read/write is a felony bc then after he has eaten fruit from the Tree of the Knowledge of Good and Evil then he can not only add up his own wages but just print his own damn money just by followin' the newz.    

      I'm callin' the copz and doing a citizens arrest on myself and everyone in this room put yer hands up yer all busted!!...who gave us the right to print our own money from home using E-trade?

Wed, 07/27/2011 - 15:19 | Link to Comment kito
kito's picture

ive been buying dia and spy this week. these f-kin idiot legislators are killing me!!!! i keep buying waiting for the short term lift off and they keep fumbling

Wed, 07/27/2011 - 15:19 | Link to Comment kito
kito's picture

ive been buying dia and spy this week. these f-kin idiot legislators are killing me!!!! i keep buying waiting for the short term lift off and they keep fumbling

Wed, 07/27/2011 - 14:52 | Link to Comment Village Smithy
Village Smithy's picture

We are currently flirting with the 50 DMA in the ES, but the more important 200 DMA is much closer than it was the last time the ES dipped below the 50. That gives me a woody. A short woody you could say.

Wed, 07/27/2011 - 15:03 | Link to Comment bob_dabolina
bob_dabolina's picture

Yea, look at the risk spread!

Wed, 07/27/2011 - 15:01 | Link to Comment bob_dabolina
bob_dabolina's picture

For all those that want to increase taxes to help pay off the national debt - 

Why don't you stop putting the responsibility on me, and man up and do it yourself. 

https://www.pay.gov/paygov/forms/formInstance.html?agencyFormId=23779454

Why doesn't Warren Buffet click on the above link and donate his money BEFORE he dies? We could really use your $50 billion Warren, please donate before you're dead. Charlie Munger can do the same, it's all good as long as you eat your peas you should be fine.

Wed, 07/27/2011 - 15:05 | Link to Comment GoinFawr
GoinFawr's picture

Careful, you're beginning to sound like Ralph Nader:

http://onlythesuperrich.org/

Wed, 07/27/2011 - 14:59 | Link to Comment mynhair
mynhair's picture

To the 50 dma!  Cheers!  May the road rise up and slap you in the face.

Urrppp

Wed, 07/27/2011 - 15:11 | Link to Comment Catullus
Catullus's picture

Question: Is LIBOR no longer relevant in short term interest rates?

Wed, 07/27/2011 - 15:20 | Link to Comment trentusa
trentusa's picture

London will always be relevent. God save the Queen!

Wed, 07/27/2011 - 15:30 | Link to Comment Franken_Stein
Franken_Stein's picture

 

There is no God and I can prove it.

 

Wed, 07/27/2011 - 15:15 | Link to Comment Franken_Stein
Franken_Stein's picture

 

In order to rid our streets of graffiti, here's what we should do:

 

1. Impose a graffiti tax on spray cans to make the price become prohibitive for poor people

2. Impose hefty fines for illegal spraying

3. Order all spray can makers to add a chemical to the paint, that makes it easier to remove it with a specifically designed anti-graffiti detergent, that would chemically react with the paint additive

 

Graffities are ok, but only in designated places.

Other than that it is unwanted damaging of property.

 

Wed, 07/27/2011 - 15:34 | Link to Comment DCFusor
DCFusor's picture

You might have left off your sarcasm tag, and if so, you fooled me.  You know that chit only happens in cities where the decay is already setting in, right?  So if you're seeing it, it means you're too dumb to move out.  Haven't seen any out here in the country since I moved here in '79.  And we like our spray paint good, and cheap.

 

Or, of course, you could go vigilate and just go and shoot anyone carrying spray paint cans at night and improve the breed for the rest of us.

Wed, 07/27/2011 - 15:11 | Link to Comment carbonmutant
carbonmutant's picture

Wed, 07/27/2011 - 15:17 | Link to Comment Subprime JD
Subprime JD's picture

A good 5% market crash should scare the congress critters to pass something. They all have the Dow app on their iPhones and berries. Fucking cowards are so spineless, especially when the wall street lords start screaming and crying

Wed, 07/27/2011 - 15:20 | Link to Comment mynhair
mynhair's picture

Tick me, baby!

Wed, 07/27/2011 - 15:21 | Link to Comment buzzsaw99
buzzsaw99's picture

Yep. CONgreff will be brought to heel by a selloff. Wall Street owns D.C..

Wed, 07/27/2011 - 15:22 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

does your broker offer Risk Waiting trading strategies? 

call 1-800-Shoot Me  if you would like our Custom Bust 'Em $25,000 starter account!

(Visa & MasterCard Accepted.  Fuk American Express)

Wed, 07/27/2011 - 15:24 | Link to Comment Debtless
Debtless's picture

Hi newbie here.

The lady on the tv machine said to buy the dip in stocks...i'm confused.

Any help is welcome.

Wed, 07/27/2011 - 15:32 | Link to Comment trentusa
trentusa's picture

newzflash, newz_junkie    :)      damn I just went to watch CSpan for a sec & the market's doqwn like 200 now...buy the dip or buy gold & risk being the sucker stuck w/ the uh gold

Wed, 07/27/2011 - 15:51 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

hi newbie.  you have a troll-like aspect, but i'll be nice, today.

  • 1) get a gun
  • 2) blow the living shit outa the fuking tv
  • 3) consider yourself enlightened
  • any questions?
Wed, 07/27/2011 - 16:52 | Link to Comment fuu
fuu's picture

Get 'im Slewie!

Wed, 07/27/2011 - 17:16 | Link to Comment espirit
espirit's picture

Slewie, don't feed the trolls.  If they make it this far through the posts, and then comment about buying a dip in stox, they deserve to be humbled.

Wed, 07/27/2011 - 15:25 | Link to Comment slaughterer
slaughterer's picture

Expect Obama on TV tonight attempting to appease the markets. 

Wed, 07/27/2011 - 15:28 | Link to Comment mynhair
mynhair's picture

Who has the 6.10 floor under AVL, dammit?

Wed, 07/27/2011 - 18:04 | Link to Comment MobBarley
MobBarley's picture

I love how the chart says <HELP> for explanation.

 

LOL.

 

I'm betting this is a run up to a soft transient default with an Amendment 14

retort with the courts finding in POTUS favor.

 

 

KENYASIAN RESERVE NOTE

 

Tue, 08/23/2011 - 23:37 | Link to Comment karmete
karmete's picture

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