VIEW: Goldman Sachs note that.........>

US TSYS/BILLS: VIEW: Goldman Sachs note that "according to ICI, the week ending

June 17 marked the 5th consecutive week of outflows from gov't only money funds.

These AUM declines, taken together with elevated dealer inventories of T-bills &

recent auction results, suggest demand for bills may have peaked, and additional

bill supply could give rise to bill cheapening. The additional supply could

occur as a result of a 'Phase 4' fiscal package that is larger than the $500bn

we have currently penciled in. However, we see two potentially mitigating

factors. 1) Prime funds, which have seen a resumption of inflows since April,

have added to their holdings of bills over the last two months as CP-bill

spreads have tightened & CP issuance has dropped; further prime fund inflows

could alleviate supply-driven cheapening to some extent. 2) Recent bill auction

sizes have been trimmed as Tsy cash balances remain high, and we suspect net

issuance could fall short of Tsy's borrowing estimates in the remainder of 2Q20,

and/or in 3Q20. Even if Tsy does not curtail bill issuance over the next few

months, we project that net bill supply will turn very sharply negative in Q4,

which in our view means any near-term cheapening is unlikely to persist."