13 week Treasury Bill at 3.30%??!!

[justin]

According to the Yahoo Finance site, 13 week T bills are quoted with a yield of 3.3%. I double-checked secondary offering prices/yields through fidelity.com and this seems to be fairly accurate.

What does this mean? This represents a drop of about 1% in the yield since yesterday. Is this a flight to quality driving the prices up and yield down?

I have never seen the 13 wk t bill rates move this much this fast before. Broader implications, if any? Or just a blip on the radar?

I've been following the cleveland fed's FOMC interest rate predictor page for a while, and yesterday represented a pretty steep drop in expected rates in the next few months. The chances of rates staying at 5.25% are increasingly slim, and there is a good chance of a greater than .25% cut at or before the next meeting in September.

(as a side note, good thing I have that ARM! )

[MasterBlaster]

Quote:

Is this a flight to quality driving the prices up and yield down?

The answer seems to be yes on this question. However note that investment grade bonds are also up in price and down in yield.

[saluki9]

You are seeing correct.

We buy our bonds mostly through Schwab's desk and we're being quoted 3.665 on the 11/15 bill right now when we were looking at over 5% two weeks ago on the same issue.

If you want to see something really wacky we're also being quoted a 180bps spread on 10 year AAA rated agency bonds over the equivalent treasury.

[dex]

It also happened in the exchange market - the dollar go stronger against the euro. But I don't expect that to last. When the market starts to believe the Fed will lower rates the dollar will fall.

The 4 wk being at 3.5% is almost like a Fed cut to those who need to borrow money. It takes pressure off the Fed.

[justin]

Looks like yields are back up to 3.6-3.7 now.

Talk about volatility in the markets...

It seems the high likelihood of a few rate cuts are being priced into the market right now and over the last couple days.

Knowledge/understanding of this isn't changing anything I'm doing investment-wise, but these little anomalies sure are interesting...