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By John Jansen on Oct 17, 2008 | Reply
Don,
I think the author means that the reason that the sales took place was for fiancial balance sheet reasons or for risk management reasons. The underlying economic fundamentals might have dictated holding a position but those fundamentals were ignored in favor of balance sheet and/or risk management constraints.
And MTR there are reasons on the bill side for the wide spread and on the deposit side. if the current trend continues movement on the banking side of the equation will obviously narrow the spread.
On the Tbill side repo rates remain low and as long as traders can eke out some positive carry there is no reason to rush to make a sale.
So if the repo rates ticks up to say 1 1/4 percent versus 1 1/2 funds rate then life would get interestng quickly as bill rates would adjust to the repo rate.
I think normal TED would be back in the zone of August 207 when nobody which the spread except some dinosaurs from the 1970s and 1980s.And I will have some one go to the history book because I confesss I dont recall where it was then and I do not have quick access to history.