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Repeating the Great Blunder of 2008- Professional Edition

The Treasury announced today that it would replenish its rainy day fund (SFP- Supplementary Financing Program at the Fed to the tune of $195 billion, bringing the total on deposit back to $200 billion, where it was before the great drawdown of last October. The Treasury will do that by selling $25 billion per week in 56 day CMBs. They apparently have not learned from their past mistakes.

As for the issue of the weak indirect bid at today’s 4 week bill auction, it’s only indirectly much ado about something. Essentially the low bid was just a corollary of the SFP sales which will now take part of the bid that would have gone to the 4 week bills. The overall indirect bid so far this week has been strong, as usual. The more paper that is offered in a week, the lighter the indirect bid may be on any given issue. The real issue here is that the Treasury is selling $140 billion in new paper. Just like the good old days in September and October of 2008.

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Professional Edition Schedule Note: The Market Update will be posted Wednesday morning before 8:30 AM NY time.

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