The TBAC is a committee of Primary Dealers tasked by the Fed to provide it with a quarterly forecast of how much Treasury debt will be needed to cover the deficit for the current and next quarters. It has persistently overestimated the strength of the US economy and government tax collections this year. Treasury supply has therefore consistently run above forecast. That has probably been a contributing factor to the recent concurrent declines in both stocks and bonds.
In the latest TBAC report issued November 2, the TBAC was once again very bullish. So it expects Treasury supply to decline. But what if they are wrong again? What if supply increases instead? This will only add to the pressure on the markets.
There are other warning signs. This report fills in the blanks and tells you what to look for to plan your trading in the months ahead.
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