we wont know if this game is back in play till next week but I along with others will most certainly be on the look out for this play. Monitor the cusip numbers and you can see whether what was Auctioned by Treasury is in fact purchased back by Fed. This was used in 2008 to give the primary dealers a bit of cash in a roundabout way.Back then though banks were in a bit more trouble then they appear today but still a profit is a profit so something to look out for.
|US GOVTS-Trading the chaos theory; buy from Treasury and sell to the Fed|
|Mar 24 2020 10:00|
|The month-end treasury coupon auctions are about to commence if the market machinations around them have already begun. The 2-year note is already a dozen basis weaker from when the Fed did its 2-year sector POMO from yesterday. Conveniently today’s 2-year sector POMO ($24 bn in 0 to 2.25-yr paper) will be taking place an hour after today’s $40 bn 2-year auction (2:00 pm vs. 1:00 pm). While the WI 2-year will not be eligible to offer in to the Fed at this POMO (only after its March 31 settlement) traders can still buy the issue as a hedge to offer in other nearby maturities. As with the T-bill auctions odds seem to favor an auction tail as many regular bidders sit the auction out and/or bid less aggressively. We will exit our 6-month T-bill long at the market (0.085%). We will look to exit our 2s/10s steepener at the market (47.7 bps). We will likely look to buy the 2-year auction.|