Treasury supply was in line with the TBAC forecast in the week just completed, and it should again be in line next week. The market has had help in absorbing new supply from the ECB’s LTRO cash, allowing the Fed to stay on the sideline. Based on the pattern the Fed has established, it will meet big Treasury issuance on March 15 with a big settlement of the Fed’s forward MBS purchases, so the market will have no problem absorbing the new supply. It wouldn’t anyway given that everyone in the world seems to want to own Treasuries and keeps buying them hand over fist.
There are hints, however, that that trend has gone as far as it can go.
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