HALISTER1: Swap Spreads Poised to Widen Amid T-Bill Supply Distortions: BMO

Swap Spreads Poised to Widen Amid T-Bill Supply Distortions: BMO

(Bloomberg) -- The market is coalescing around the idea that Treasury bill supply will increase through mid-April and will then start to fall after the tax deadline, which makes the case for swap spread widening, BMO strategists Ian Lyngen and Aaron Kohli say in note.
  • Spreads should also widen as “eventual concerns about the debt ceiling take hold once again”
  • “Key risk” to widening spreads is if the Fed starts to discuss shrinking its balance sheet
    • Passing an increase to the debt ceiling early would be another risk, “but don’t hold your breath on that one”
  • Related story: Swap Spreads Seen Widening as Debt Ceiling Reinstituted: Chart

Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Aaron Kohli (Bank of Montreal)
Ian Lyngen (Bank of Montreal)

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