Moments ago the US Treasury priced its 4 Week Bill auction, which was unique in that at just $35 billion, was not only $10 billion lower than a month ago, but was the lowest since October 15.
This may or may not explain why after last week’s curious auction yield of 0.20%, or 5 bps below the effective Fed Funds floor, today’s auction showed an even more dramatic scramble for short term liquidity, when the government sold 4 Week Bills at a rate of 0.185%, or 6.5 bps below the rate charged by the Fed!
Clearly some correlation algo in the market did not expect this because the moment the auction results were released, the USDJPY snapped lower to fresh 14 months lows, just above 110, from where it is only downhill.
The move in the USDJPY has in turn pressured stocks and all risk assets, as suddenly there appears to be a rather pronounced flight to safety and/or a fault with the Fed’s plumbing as primary dealers are willing to lock up funds with the Treasury for 4 week at a rate lower than the Fed Funds, something which shouldn’t technically be happening, and suggests the market is once again forcing the Fed to cut rates.
via Zero Hedge http://ift.tt/1MQjrqA Tyler Durden