Bonds that were the cheapest-to-deliver into a Treasury futures contract were the most heavily bought






The Federal Reserve’s highly anticipated commercial paper facility is open, but it’s unclear how much more the program will do from here to get much-needed funding flowing to companies. The yield premium over the risk-free rate that investors demand to hold asset-backed commercial paper has steadied. It shrank when the facility was announced a month ago, but the actual start to the program this week has seen it level out roughly in line with the rate offered by the Fed. And the AA-rated financial commercial paper market is now in its third straight week without any long-dated issuance, based on Fed data. (Bloomberg)

Two of the four operations from the Fed’s daily Treasury purchase shows bonds that were the cheapest-to-deliver into a Treasury futures contract were the most heavily bought. The Fed’s purchase program began in mid-March with the aim of restoring liquidity in the Treasury market, which had eroded in particular for securities lacking any sort of distinction, such as being the most recently issued, otherwise known as “on the run,” or being cheapest-to-deliver. The Fed will taper the size of its purchases to an average of $30 billion a day this week from $50 billion a day last week and a peak of $75 billion a day until April 1. Its purchases from March 13 to date total more than $1.25 trillion. (Bloomberg)

Source: Danareksa Sekuritas Debt Research

 

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