Negative t-bill yields projected
December 14, 2020
–Friday’s session was dominated by front end buying as the FT highlighted a BAML report from Mark Cabana forecasting negative t-bill rates into Q1. The Treasury General Account balance is approx $1.5 trillion. According to the article, “…that leaves the treasury needing to allow somewhere between $500 and $900bn of T-bills to mature in the first half of the year without being replaced by new issuance.” There was a buyer of 100k EDU1 at 9981 on Friday with an associated increase in open interest of 48.6k. The ‘new’ white pack, beginning with EDH1 was up 1.5. The peak ED contract is EDM1 at 9983.5. The all-time high tick for any euro$ contract was 9989.5 for the second red (6th quarterly) on May 8 of this year.
–The ten year yield fell 1.5 bps to 89.1 on Friday. Just as a comparison, in early May when euro$ contracts were posting all-time highs, the ten year yield was 68 bps. Tens eventually made a new low yield at 50 bps in early August. The two-year ended at 11.9 bps, down 1.8, flirting with all-time low of 10.7 from July 31.
–EDH1 vs FFJ1 (a proxy for libor/ois) settled at 10, down 0.5 on the day, a new low. Today marks the final settle for EDZ0. FOMC announcement and press conference on Wednesday.
