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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gangland's picture





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."




slaughterer's picture

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

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

hedgeless_horseman's picture

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

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.

mmlevine's picture

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

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.



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.

buzzsaw99's picture

bills are tbtf lulz

Raynja's picture

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

Dr. Richard Head's picture

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

r101958's picture

Now the FED will lower the discount rate to -0.25

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.

MonsterZero's picture

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

Long-John-Silver's picture

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

SheepDog-One's picture

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

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!

pupton's picture

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

bob_dabolina's picture

We get it. 

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

Sutton's picture

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

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).

slaughterer's picture

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

fuu's picture

PPT out of cash right now.

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%

Bastiat's picture

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

That is a treasure!

stewie's picture

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

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!

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.

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...

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.


slaughterer's picture

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

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?

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

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

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.

bob_dabolina's picture

Yea, look at the risk spread!

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. 


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.

GoinFawr's picture

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


mynhair's picture

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


Catullus's picture

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

trentusa's picture

London will always be relevent. God save the Queen!

Franken_Stein's picture


There is no God and I can prove it.


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.


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.

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