Another 28 Days
Following up on this post, a 4-week auction over year-end (PDF) that sold at 0.00% interest, with a coverage ratio of 4.4:1. (Yield unchanged from the previous week, and the week before that.)
Who could see Looming Inflation in this? See next post.
Woohoo! Another T-bill that is issued in December and matures in January. Another 4-week T-bill auction where there is $28 billion to fight over (after the Fed is done expanding its balance sheet) for the $32 billion that needs to roll. Proof that long-term inflation is at bay! You can tell Ken never worked in capital markets before. Anyone want to take a prop bet? Over/under (I got the over) high yield to clear the last 4-week T-bill auction for a security to be issued in January 2010, 0.08%. Any takers?
Double or nothing bid-cover (conditioned on the Fed not buying more than 1/6 of the securities) is over/under (I got under) 3.2.
Also, 2/10 spread update: 275 basis points.
10/30 spread: 96 basis points.
I won’t cite TIPS because I recognize its an illiquid market.
How’s that 2/10 flattener working out for you Ken?
And how could I forget that 30-year auction. My memory is going, but as I recall there was about a 4 basis point tail on that bad boy. Glad we base are long-term outlook on inflation based on short-term interest rates and not long-term interest rates (more specifically break-even FRAs).
Ken,
Jay is right, you can’t use tbills as an inflation indicator for a number of reasons, most obviously, the term is too short. If you want to use Tbills, look at the spreads between Tbills and Tbonds. They are very wide, which indicates inflation expectations.