While traditionally few care about T-Bill auction results, which are usually a rather subdued affair, today was different: with today's $20 billion in 4-Week Bills maturing on October 5, or smack in the middle of the interval when the US is expected to run out of cash absent a debt ceiling deal, there was palpable turmoil in the Bills market, as the yield on the just concluded auction demonstrated.
With the When Issued trading at 1.23%, the just priced auction printed at a high yield of 1.30%, what appears to be a record tail of7 bps, and the highest yield since September 2008. It is also an indication that for all the talk of a reduction in government shutdown/debt ceiling crisis odds, the market will have none of it, as the ongoing "king" in the October bills demonstrates.
The internals were mostly remarkable for the soaring yields, with other components coming roughly in line.:
- High yield 1.300% vs prior six auction average 0.966%
- Bid-to- cover 3.04 vs prior six auction average 3.07
- Dealers awarded 58.5% vs previous six auction average 64.7%
- Direct bidders awarded 16.9% vs prior six auction average 8.6%
- Indirect bidders awarded 24.6% vs prior six auction average 26.6%
Putting the latest T-Bill "Kink" in perspective, the chart below shows just how high the Sept-Oct "hump" has blown out to following the auction.