Market Commentary

The third and final leg of the Treasury auction – $13 billion 30s reopening – met with strong demand. The auction came through by 1.8 basis points, compared with an average tail of two basis points for the past 12 auctions. Direct bidders took down 29.6% of the issue, a new record, absorbing a larger amount than indirect bidders (23.9%). With supply out of the way, the rate curve may continue to flatten over the coming days.

The Fed released its fourth-quarter Flow of Funds, the detailed listing of holders of U.S. Treasuries and Agencies/MBS securities. This is precisely where the Fed is the dominant market maker, by being the perpetual bid for 5% and lower yielding securities. And while there are no major surprises in the data set, it is. . .  

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To our Customers and Clients:

It is amazing that it has been 10 years since we all worried about the potential catastrophic impact of Y2K. While we opened the last decade with little effect from an anticipated event that had everybody’s focus, we certainly closed it with an unexpected and devastating event.