Someone Is Getting Nervous-est

Another day, another shut government and 1-month T-Bills have surged another 6bps to 18.5bps. Those who read our suggestion from Sept 26 to hedge the political stupidity and debt ceiling debate and put on the 1M1Y flattener have seen the fastest plunge and inversion (to negative!) in the curve since early 2009. Despite the relative calm in repo markets, which is likely due to expectations that any technical default will be for a minim al length, the short-term bills most likely to be affected (the 10/31/13 T-Bills) are seeing the largest daily deterioration yet as traders exit and price in the possibility of missed payment. 1Y USA CDS has spiked by a massive 26bps to 65bps, higher than during the Lehman crisis and second only to Summer 2011.

 

 

 

Putting the 1M1Y move in perspective: fastest flattening since March 2009!

And since the September 26 reco:

Charts: Bloomberg