I have long operated on the assumption that the US Treasury will follow the TBAC issuance forecast, with exceptions only in obvious emergencies. That assumption was well supported by the facts, over the many years that I’ve tracked this. That changed this month.
The Treasury has thrown a curve by suddenly reversing from the scheduled issuance forecast for T-bills to a program of big T-bill paydowns. That started about a week ago, and so far it’s set to continue for at least another week. It has already pumped cash into the accounts of holders of expiring T-bill, and will pump in even more over the next week. That money then goes mostly into the Fed’s RRPs, but some also fans out into other markets. Non subscribers, click here to read this report.
This has all come as a surprise, and there’s no indication of when it will end. One thing is certain. It will end, because the Treasury is rapidly drawing down its cash with these paydowns. The Treasury has heavy outlays in February, and it will need to have a big pile of cash on hand next summer when the next debt ceiling problem rears its ugly head. Non subscribers, click here to read this report.
But while it still has cash and the will to support the markets, it will do so. That will allow the markets to continue these incredible monster bounces that we’ve seen of late. Trending higher, however, is another story. Non subscribers, click here to read this report.
Are the bounces playable? I would not get sucked into the idea that this is some kind of bullish reversal. It’s manipulation. It’s short term. Without the Fed pitching in, it’s not sustainable. Non subscribers, click here to read this report.
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