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The Fed pulled $750 million out of the liquidity pool on Tuesday. It added $9.5 billion in 3 day repos against expirations of $9.5 billion. Given the length of the term it looks as though they may do substantial adds on Wednesday and Thursday to help with the settlement of $19.9 billion in new Treasury paper. $16 billion of that was in the 4 week bill auctioned today. FCBs took a larger than usual $3.7 billion of the issue, but it was still less than ¼ of the new cash raised, causing the rate to ratchet up. The Treasury also took the market by surprise, announcing that it will auction $6 billion of 6 day CMBs on Thursday. Click here to download complete report in pdf format (Professional Edition Subscribers).

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