Treasury shaves borrow estimate
January 30, 2024
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–Early trade: buy of 70k TY week-1 110.75/100.00 p spread for 9/64. Expires Friday, so captures FOMC, QRA, NFP and earnings reports. Open interest in the two puts +66k and +59k. Settled 8 vs TYH4 111-165.
–Late trades (post-Treasury borrowing estimate) two block buys of TU (+7.6k 102-218 and +15k 102-223) appear to be exits as OI in TUH4 declined 21k. Block buy of 21742 FVH4 107-30 vs sale 4432 WNH4 126-30 also looked like exit. OI in WNH4 fell 6.8k.
–The late bid in treasuries, which has carried into this morning, was sparked by Treasury’s reduced borrowing estimate for the quarter. ($760b from original estimate of $816b). Actual composition of issuance will be released Wednesday. From Treasury:
- During the January – March 2024 quarter, Treasury expects to borrow $760 billion in privately-held net marketable debt, assuming an end-of-March cash balance of $750 billion.[2] The borrowing estimate is $55 billion lower than announced in October 2023, largely due to projections of higher net fiscal flows and a higher beginning of quarter cash balance.[3]
- During the April – June 2024 quarter, Treasury expects to borrow $202 billion in privately-held net marketable debt, assuming an end-of-June cash balance of $750 billion.[4]
–Of course, Blinken referring to the MidEast situation as “incredibly volatile” probably adds to treasury buyers at the margin, and China’s ten year yield at a new historic low of 2.45% (just below the 2020 low of 2.47) underlines economic woes there.
–Dallas Fed Mfg was notably weak at -27.4. Outside of Covid there’s but one slightly lower reading from last year. Today’s news includes Consumer Confidence, strong at 110.7 last, JOLTS, expected 8750k vs 8790k last. Earnings post-close from MSFT and GOOGL. MSFT closed at an all-time high yesterday and is > $3T mkt cap. It has doubled 3x since 2016 when it was ~50, now 409.72. GOOGL also at an all-time high yesterday 153.51. Market cap near $2T. So, adding the market cap of those two equates to around 17% of US GDP. The change in Treasury’s borrowing estimate of $50 billion is a 1% change in value of MSFT + GOOGL.
–Ten year yield fell 7.2 bps yesterday to 4.087%…nearing 4 again.
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https://home.treasury.gov/news/press-releases/jy2054
