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The projections prompted U.S. Treasury debt yields to fall slightly, with the benchmark 10-year yield last at 4.88%. "Interest in today's borrowing projections have been higher than normal," said Thomas Simons, money market economist at Jeffries in New York. Investors awaited the Treasury's quarterly refunding statement on Wednesday for details on which maturities will be increased as the department pursues record borrowing levels. QUARTERLY RECORDSThe reduced $776 billion borrowing estimate would still be a record for any October-December period, exceeding the $689 billion in the 2021 quarter boosted by high COVID-19 relief outlays. In the third calendar quarter of 2023, the Treasury said it borrowed $1.01 trillion and ended that period with a cash balance of $657 billion.

Persons: Rick Wilking, Thomas Simons, Jeffries, Steven Zeng, Wednesday's, Zeng, Karen Brettell, David Lawder, Daniel Burns, Davide Barbuscia, Andrea Ricci, Richard Chang Organizations: REUTERS, U.S . Treasury, Treasury, Investors, Deutsche Bank, Thomson Locations: Westminster , Colorado, U.S, California, New York

NICKELS & STEAMROLLEREstimating the size of hedge funds' basis trade bets is difficult because transparency and visibility around hedge funds is so low at the best of times, especially with regard to their more complex activities and strategies. Many analysts look at leveraged funds' position in Treasuries futures, and the Aug. 30 Fed paper also noted speculators' repo borrowings. This is a fairly reliable sign of basis trade activity, the Aug. 30 Fed paper says. Overnight repo rates have steadily tracked the fed funds policy rate since March 2022. Basis trade liquidation, as funds got squeezed out of their positions through margin and collateral calls as volatility rocketed, likely contributed to that dislocation.

Persons: Steven Zeng, Christoph Schon, Jamie McGeever, Paul Simao Organizations: Fed, Bank for International, Deutsche Bank, STEAMROLLER, Futures, Reuters, Thomson Locations: ORLANDO, Florida, U.S

The trades - typically the domain of macro hedge funds with relative value strategies - consist of selling a futures contract, buying Treasuries deliverable into that contract with repurchase agreement (repo) funding, and delivering them at contract expiry. "Cash-futures basis positions could again be exposed to stress during broader market corrections," Fed economists said in an Aug. 30 note. Separately, in a Sept. 8 note that looked among other things at hedge funds' Treasury exposures, Fed economists said there was a risk of a rapid unwind of basis trade positions in case of higher repo funding costs. "However, the approach they take may not be straightforward as the Fed does not have direct regulatory oversight over hedge funds," he said. "Cash futures basis trades are vulnerable to two risks: higher margin costs on the futures short and higher financing costs on the cash long position," Barclays said in a note on Tuesday.

Persons: Steven Zeng, Deutsche's Zeng, Davide Barbuscia, Megan Davies, Paul Simao Organizations: Federal Reserve, Treasury, repo, Futures Trading Commission, Deutsche Bank, U.S, Barclays, Thomson Locations: U.S, Treasuries

☆ 'A short-term glitch:' Wall Street pros shrug off the effect of Fitch's downgrade on markets
▼ + stars: | 2023-08-02 | by ( Sarah Min | ) www.cnbc.com time to read: +3 min

The Dow Jones Industrial Average fell more than 200 points Wednesday after the downgrade as traders weighed the move. US10Y 1Y mountain 10-year yield 1-year However, Wall Street strategists mostly took the downgrade in stride. The S & P 500's 17% rally this year and the Nasdaq Composite's 33% advance had some traders worrying that equities have surged "too far, too fast." Stovall's S & P 500 year-end target is at 4,575 . Goldman Sachs' Jan Hatzius said Tuesday the downgrade will have "little direct impact" on financial markets.

Persons: Fitch, Janet Yellen, Sam Stovall, Stovall's, Wells Fargo's Christopher Harvey, Goldman Sachs, Jan Hatzius, Steven Zeng, Management's Yung, Yu Ma, Ma, CFRA's Stovall, Deutsche Bank's Zeng, Michael Bloom Organizations: U.S ., Fitch, AAA, Dow Jones, Treasury, Street, Nasdaq, Deutsche, BMO Locations: Washington, U.S, Tuesday's

☆ U.S. markets may not see lasting impact from Fitch downgrade
▼ + stars: | 2023-08-02 | by ( Susan Mathew | ) www.reuters.com time to read: +3 min

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., July 26, 2023. Early moves in U.S. financial markets on Wednesday indicated some aversion to riskier assets as investors assessed the impact of the surprise downgrade. The dollar climbed 0.2%, after slipping broadly in the wake of the downgrade. "Investors have lived through the S&P downgrade in 2011 and remember coming away unscathed. "We see the market impact from the downgrade news as ultimately limited, and Friday's jobs report could trump the downgrade news as monetary policy is still the dominant driver for yields."

Persons: Brendan McDermid, Steven Zeng, Jay Barry, Data, J.P.Morgan, Fitch, Goldman Sachs, Jan Hatzius, Moody's, Susan Mathew, Saumyadeb Organizations: New York Stock Exchange, REUTERS, P Global, Nasdaq, Treasury, Fitch, Deutsche Bank, Federal Reserve, Gross, AAA, Aaa, U.S ., U.S, Thomson Locations: New York City, U.S, Bengaluru

☆ Auction sizes set to increase at US Treasury refunding
▼ + stars: | 2023-07-28 | by ( Karen Brettell | ) www.reuters.com time to read: +4 min

The Treasury earlier this month posted a $228 billion budget deficit for June, up 156% from a year earlier. "They have to grow coupon auction sizes - not just at the August refunding, not just at the November refunding, but also at the February refunding as well, because they are ultimately trying to balance this supply picture between bills vs coupons and this growing financing need," Swiber said. The Treasury Borrowing Advisory Committee (TBAC) recommends that bills make up 15-20% of the total marketable debt. The Treasury will release its quarterly borrowing requirement Monday afternoon, and its refunding news comes Wednesday at 0830 ET/1230 GMT. The Treasury surveyed dealers about their opinion on how some details of the program should work ahead of the August refunding.

Persons: Steven Zeng, Meghan Swiber, Swiber, Ben Jeffery, Karen Brettell, Davide Barbuscia, Gertrude Chavez, Dreyfuss, Hugh Lawson Organizations: U.S . Treasury Department, Treasury, COVID, Deutsche Bank, Bank of America, BMO Capital Markets, Thomson Locations: U.S

☆ Markets brace for deluge of Treasury bill supply after US debt deal
▼ + stars: | 2023-06-05 | by ( ) www.reuters.com time to read: +3 min

The Treasury General Account has fallen sharply since January when Treasury hit its limit on borrowing. Cash balance targets indicate it will need to rebuild its account quickly now that the borrowing cap has been lifted. "Money market funds are extremely short ... so the trillion-dollar Treasury bills (issuance) would be welcome with open arms," said money market fund expert Peter Crane, president of Crane Data. Part of that could be due to the fact that money funds, heavily exposed to short-term debt this year, have started to extend the their maturities recently. "The Federal Reserve RRP has been holding trillions of the money fund assets and so that money can easily be redeployed into Treasury bills.

Persons: Steven Zeng, Zeng, Glenmede, Peter Crane, RRP, Bank's Zeng, Davide Barbuscia, Karen Brettel, Alden Bentley, Matthew Lewis Organizations: YORK, Treasury, Deutsche Bank, Treasuries, Crane, Federal, Thomson Locations: New York

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