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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 | 1498684 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 | 1498805 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 | 1498819 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 | 1498834 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 | 1498896 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 | 1498687 mmlevine
mmlevine's picture

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

Wed, 07/27/2011 - 14:55 | 1498802 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 | 1498690 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 | 1498692 buzzsaw99
buzzsaw99's picture

bills are tbtf lulz

Wed, 07/27/2011 - 14:43 | 1498761 Raynja
Raynja's picture

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

Wed, 07/27/2011 - 14:59 | 1498814 Dr. Richard Head
Dr. Richard Head's picture

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

Wed, 07/27/2011 - 14:30 | 1498704 Cassandra Syndrome
Cassandra Syndrome's picture

Spread Bitchez

Wed, 07/27/2011 - 14:30 | 1498705 r101958
r101958's picture

Now the FED will lower the discount rate to -0.25

Wed, 07/27/2011 - 14:34 | 1498733 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 | 1498706 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 | 1498724 MonsterZero
MonsterZero's picture

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

Wed, 07/27/2011 - 15:00 | 1498817 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 | 1498727 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 | 1498821 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 | 1498847 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 | 1498723 SheepDog-One
Wed, 07/27/2011 - 14:37 | 1498744 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 | 1498751 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 | 1498758 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 | 1498781 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 | 1498899 fuu
fuu's picture

PPT out of cash right now.

Wed, 07/27/2011 - 14:43 | 1498767 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 | 1498774 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 | 1498850 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 | 1498877 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 | 1498891 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 | 1498783 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 | 1498784 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 | 1498792 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 | 1498871 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 | 1498875 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 | 1498876 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 | 1498793 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 | 1498808 bob_dabolina
bob_dabolina's picture

Yea, look at the risk spread!

Wed, 07/27/2011 - 15:01 | 1498809 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 | 1498840 GoinFawr
GoinFawr's picture

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

http://onlythesuperrich.org/

Wed, 07/27/2011 - 14:59 | 1498816 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 | 1498854 Catullus
Catullus's picture

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

Wed, 07/27/2011 - 15:20 | 1498878 trentusa
trentusa's picture

London will always be relevent. God save the Queen!

Wed, 07/27/2011 - 15:30 | 1498911 Franken_Stein
Franken_Stein's picture

 

There is no God and I can prove it.

 

Wed, 07/27/2011 - 15:15 | 1498855 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 | 1498935 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 | 1498858 carbonmutant
carbonmutant's picture

Wed, 07/27/2011 - 15:17 | 1498870 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 | 1498883 mynhair
mynhair's picture

Tick me, baby!

Wed, 07/27/2011 - 15:21 | 1498884 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 | 1498887 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 | 1498895 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 | 1498926 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 | 1499014 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 | 1499259 fuu
fuu's picture

Get 'im Slewie!

Wed, 07/27/2011 - 17:16 | 1499370 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 | 1498897 slaughterer
slaughterer's picture

Expect Obama on TV tonight attempting to appease the markets. 

Wed, 07/27/2011 - 15:28 | 1498904 mynhair
mynhair's picture

Who has the 6.10 floor under AVL, dammit?

Wed, 07/27/2011 - 18:04 | 1499578 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 | 1593595 karmete
karmete's picture

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