The belly of the curve sold off while bills and the long bond finished higher for the day. The curve flattened three and a half basis points to +248 bps., and ten-year TIPS breakevens tightened 3 bps to 159 bps. despite the better than expected CPI figures.
Just a few days after making new lows, the TED spread jumped 3 basis points yesterday thanks to the unwinding of a little known Fed program. The Fed’s Supplementary Financing Program has involved the Treasury maintaining $200 billion in additional bills outstanding and shipping the money over to the Fed for their balance sheet operations – instead of the Fed printing the money on their own. It was announced yesterday that this will be unwound to $15 billion in the coming weeks, presenting a supply issue that bills rallied on. There was also a report out that two FOMC voters will favor a rate hike at next week’s meeting, but I’m not giving much credence to that talk at this point. At least not while the majority of FOMC members are still telegraphing, “Exceptionally low levels of the federal funds rate for an extended period.”
Cliff J. Reynolds Jr., Investment Analyst
Just a few days after making new lows, the TED spread jumped 3 basis points yesterday thanks to the unwinding of a little known Fed program. The Fed’s Supplementary Financing Program has involved the Treasury maintaining $200 billion in additional bills outstanding and shipping the money over to the Fed for their balance sheet operations – instead of the Fed printing the money on their own. It was announced yesterday that this will be unwound to $15 billion in the coming weeks, presenting a supply issue that bills rallied on. There was also a report out that two FOMC voters will favor a rate hike at next week’s meeting, but I’m not giving much credence to that talk at this point. At least not while the majority of FOMC members are still telegraphing, “Exceptionally low levels of the federal funds rate for an extended period.”
Cliff J. Reynolds Jr., Investment Analyst
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