BA/ML analyst Mark Cabana eyed.....>

US TSYS/RESEARCH: BA/ML analyst Mark Cabana eyed "mkt implications of the swings

in bill supply" around debt limit period, studying past episodes. He said

"large" bill supply "cuts" will mean "longer-dated bills and discos outperform,

short-dated spreads widen, and repo rates decline. Longer-dated bills & discos

typically performed best during supply cuts as shorter-dated bills have the most

exposure to any default risk. Repo rates also move lower but remain bounded by

the Fed's ON RRP and short-dated spreads show signs of relative Treasury

richening. Three-month LIBOR OIS narrowed during these periods though most of

this appeared driven by banks finding other sources of unsecured USD funding in

the wake of money fund reform."

- He adds a "large increase" in bill supply means "longer-dated Treasury bill

and agency cheapen, front end spreads narrow and repo moves higher. Longer-dated

bills were most impacted by the increased supply though discos also cheapened

modestly. Repo moved up in the Fed's tgt range and GCF breached the Fed's IOER

rate on occasion. Spreads also narrowed."