This is big.
In a panic over the surge in the 10 year Treasury yield and the attendant fall in Treasury note and bond prices, the US Treasury announced today that it would pay down $55 billion in outstanding T-bills.
The funds will settle a week from today, on February 23.
This is cash that will go directly into the accounts of the dealers, banks, and investors who hold the expiring paper. The paydown of the expiring paper will simultaneously create a shortage of paper in which to reinvest cash.
The Treasury’s goal is to force the former holders of the short term bills to reinvest the cash further out on the yield curve in order to stem the rise in yields and the fall in bond prices.
The declining bond prices are crushing the leveraged portfolios of Primary Dealers, with the resulting collateral calls. There’s an imminent threat of contagion into stocks, and ultimately a systemic crash, within the next few days if the plunge in bond prices is not reversed.
I have been warning about this approaching catastrophe for months. It now appears to be upon us.
See these reports for more details, as well as strategy viewpoints.
Liquidity Trader Subscriber Reports –
Primary Dealers are Already Dead – Free Summary
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