Why? It has to do with liquidity in short issues ( referred to as coups). As twist progresses, the Fed will no longer own any issues 2016 and shorter. The Fed is the backstop in repo when issues get tight as they auction off issues they own to dealers. Now, if an issue gets tight they will not have any to auction. In addition to that, there are certain counterparties that don’t repo out their holdings (and they buy a number of coups). So going forward, dealers will be less likely to offer liquidity in issues that they are worried about shorting. This will also include bills. So, do not be surprised to see more negative bill rates in bill-land over the quarter ends.
Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.
Dean Popplewell
He has a deep understanding of market fundamentals and the impact of global events on capital markets.
He is respected among professional traders for his skilled analysis and career history as global head
of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean
has played an instrumental role in driving awareness of the forex market as an emerging asset class
for retail investors, as well as providing expert counsel to a number of internal teams on how to best
serve clients and industry stakeholders.
Latest posts by Dean Popplewell (see all)
- Euro zone bond yields sink as German manufacturing slows - 24 July 2019
- How Boris Johnson Plans to Deliver Brexit in 100 Days - 24 July 2019
- Weak PMI’s Sink EUR - 24 July 2019