HALISTER1: 1-Mo., 3-Mo. Bills May Trade Through RRP Rate Beyond Yr-End: CS

1-Mo., 3-Mo. Bills May Trade Through RRP Rate Beyond Yr-End: CS

(Bloomberg) -- T-bills may trade through the Fed’s 25bp RRP rate around year-end and beyond as Treasury cuts new supply to address the end of the debt ceiling suspension at a time when it’s usually ramping up issuance to meet tax receipts, Credit Suisse strategists led by Praveen Korapaty said in note.
  • Assuming Treasury hits its targeted $390b cash balance at year-end, there may be a “slightly faster decline” in bill supply than typical as the debt ceiling suspension expires in March; bulk of supply cut may come in February, March
  • Large paydown of bills in 1Q 2017 means bill holdings will remain constrained by reduced supply, which may incentivize agencies to continue their fast pace of issuance
    • Since Nov. 2015, government funds have put $650b of $900b fund inflows into agency debt and Treasury repos and put less than $200b into Treasuries
  • NOTE: 1-mo. bill yielding 0.2180%, 3-mo. bill 0.3196%
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Praveen Korapaty (Credit Suisse Group AG)

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