Hi Meyrick, Doesn't the TGA get liquidated during the Debt Ceiling anxieties to pay bills and will be re-built after the ceiling is passed when the Treasury can begin issuing debt again?
Also, I'm interested in the connection you draw between funding and deliveries in Chicago. I don't quite get the intuition behind the relationships. In an idealized sense, how should fails, RRP rates, TGA, etc, interact? You've included change in net short as a dimension but do you think actual deliveries would be a better dimension on which to analyze these relationships? If so, CUSIP level data can be found here:
My guess is TGA is built in anticipation of possible Debt Ceiling difficulties, meaning a liquidity drain. Yes, you're almost certainly right, TGA would be run down if there was an overrun of Debt Ceiling discussions, but that would come with its own, different anxieties.
On your second point, I'm fairly convinced actual deliveries are not in play - most shorts simply want to optimise their roll into the next contract. I can't pretend to have a very clear-cut idea of all the mechanics - I thought it useful to piece together suggestive movements at quarter-end of bank balance sheet tightness coinciding with futures deliveries.
Hi Meyrick, Doesn't the TGA get liquidated during the Debt Ceiling anxieties to pay bills and will be re-built after the ceiling is passed when the Treasury can begin issuing debt again?
Also, I'm interested in the connection you draw between funding and deliveries in Chicago. I don't quite get the intuition behind the relationships. In an idealized sense, how should fails, RRP rates, TGA, etc, interact? You've included change in net short as a dimension but do you think actual deliveries would be a better dimension on which to analyze these relationships? If so, CUSIP level data can be found here:
https://www.cmegroup.com/clearing/operations-and-deliveries/registrar-reports.html
Good questions.
My guess is TGA is built in anticipation of possible Debt Ceiling difficulties, meaning a liquidity drain. Yes, you're almost certainly right, TGA would be run down if there was an overrun of Debt Ceiling discussions, but that would come with its own, different anxieties.
On your second point, I'm fairly convinced actual deliveries are not in play - most shorts simply want to optimise their roll into the next contract. I can't pretend to have a very clear-cut idea of all the mechanics - I thought it useful to piece together suggestive movements at quarter-end of bank balance sheet tightness coinciding with futures deliveries.