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Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors
Forward Guidance
Importance of Constant Demand to Meet Treasury Funding Needs
There is a constant need for new demand in the market to meet the massive funding needs of the treasury, given the huge issuance of over 500 billion each quarter. The net issuance, taking into account maturing securities, is about half a trillion per quarter, highlighting the significant demand required. Major institutions like Bank of America, JPMorgan, and Citibank could face challenges as they might run out of room in their balance sheets to accommodate this demand. Despite institutions being able to preposition for individual auctions, the overall bond market reaction is influenced by data and supply. Consequently, buyers often lose money in auctions unless they act swiftly, emphasizing the lack of a collective balance sheet to preemptively address the vast supply of bonds.
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