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2026-05-27 20:59:48
[Preview of the $69 Billion US 4-Month Treasury Bill Auction: Slightly Higher Rollover Rates Suppress Bidding, September SOFR Futures Imply 80% Probability of Rate Hike] ⑴ The US Treasury will issue $69 billion in WI 4-month Treasury bills, maturing on September 29. Last week's yield on similar Treasury bills was 3.59%, with current bids at 3.625%. The WI 4-month bid is 3.63%, and the forward rollover rate is 0.6 basis points, slightly above fair value. This relatively high price is expected to suppress bidding demand. ⑵ The butterfly spread between 2-month and WI 4-month and 6-month Treasury bills is 1.7 basis points, widening by 1.8 basis points from last week. The 3-month range for this butterfly spread is -1 basis point to +2.5 basis points, currently at the wider end of the range. ⑶ The current implied rate for September secured overnight funding rate futures is 3.75%, with pricing in an 80% probability of a 25 basis point rate hike. Against this backdrop, a strategy of shorting the September contract and buying WI 4-month Treasury bills is not attractive. The average bid-to-cover ratio for the past six 4-month Treasury bill auctions was 3.07 times, with indirect bidding accounting for 53.14%.
