Treasury supply will weigh on the minds of traders this week. The Treasury plans to auction $115 billion in notes over the next four days, the second time in the last three weeks the Treasury has held four days of auctions in the same week. Including bills, this week’s supply is over $200 billion. The $115 billion number includes a $6 billion 20-year TIPS auction today. The level of success in this week’s auctions will be the primary dictator of rate movement this week.
On Friday, CIT altered its offer to purchase its outstanding floating rate debt due on August 17. Those who agree to tender their bonds before the end of July will still receive the original 82.5 dollar price, but those who sign up after that will only receive 77.5 cents on the dollar. This move may get more bondholders to respond sooner, but in doing so CIT runs the risk of deterring investors from participating altogether. The tender offer is very important to the survival of CIT because they are not allowed to use any of the $3 billion raised last week to pay off the $1 billion in debt that matures in August. If the tender fails to attract enough interest CIT will likely be forced into chapter 11, instead of trying to manage a restructuring outside of bankruptcy court. The bonds were trading in the low $80’s last week, a good sign considering the $82.5 tender price.
Cliff J. Reynolds Jr., Investment Analyst
On Friday, CIT altered its offer to purchase its outstanding floating rate debt due on August 17. Those who agree to tender their bonds before the end of July will still receive the original 82.5 dollar price, but those who sign up after that will only receive 77.5 cents on the dollar. This move may get more bondholders to respond sooner, but in doing so CIT runs the risk of deterring investors from participating altogether. The tender offer is very important to the survival of CIT because they are not allowed to use any of the $3 billion raised last week to pay off the $1 billion in debt that matures in August. If the tender fails to attract enough interest CIT will likely be forced into chapter 11, instead of trying to manage a restructuring outside of bankruptcy court. The bonds were trading in the low $80’s last week, a good sign considering the $82.5 tender price.
Cliff J. Reynolds Jr., Investment Analyst
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