The next 6-month T-Bills auction is on Thursday 26 Sep 2024.
Given that the Feds just did a jumbo 0.50% rate cut this week.
Quite a few of you have been asking whether we’ll see a further drop in T-Bills yields at next week’s auction.
The last T-Bills auction had a 3.10% cut-off yield, so if it falls further then T-Bills really aren’t that attractive any more.
Reflecting this, we saw demand for T-Bills fall quite sharply in the most recent auction, and spreads indicating tighter bids – indicating that most investors have caught on to this fact (that T-Bills are no longer a must buy).
2 points I wanted to discuss.
Will T-Bills yields drop further after Fed rate cuts? Will I still buy the 6-month T-Bills despite falling interest rates? Will T-Bills yields drop further after Fed rate cuts? What is the expected yield on the next 6-month T-Bills Auction? Jerome Powell’s Fed cut interest rates by 0.50% this week
In case you missed it, Jerome Powell’s Fed cut interest rates by 0.50% this week.
You can see the full transcript here, where Powell tries to paint an optimistic picture of the US labour market and insist that the Feds are not behind the curve here.
But if you ask me, I would say that as Fed Chair, he really couldn’t have said anything else.
My personal take is that recent US data paints a picture of a slowing labour market, and between inflation and unemployment, I think the risk has now tilted towards the latter.
So the Fed was slightly behind the curve here, and they had to “catch up” so to speak.
The market today is pricing in another 2.0% in interest rate cuts in the next 12 months.
I know a lot of
