1. Actually, I think January 31st QRA determines how the Treasury finances Q2, not Q1. After all, a third of it would have already passed.
2. I didn't know the Treasury aims to only issue 20% of the total debt stock in short-term bills. That's good to know!
3. I don't think the arguments to delay increased issuance based on the economy sticks: it isn't any more fragile than it were when JY increased issuance in late July.
Thanks Florian. Question about income taxes on your short-term trading, I am sure you have answered this before for others. Do you live in a jurisdiction that is more advantageous to tax on short-term trading, or do you just accept taxes as a cost of business? Thanks in advance!
Florian, as usual, a very well thought out commentary. I think one thing to keep in mind regarding the politics, which is obviously a wildcard, is that as you point out, inflation expectations are rising and given the last CPI reading was sticky high, that is likely to be a much bigger negative than any equity market rally is a positive for the country at large. so, Yellen needs to be very careful about fostering too much economic activity and concomitant inflation or that will act as a bigger negative I think. they have a very difficult dance ahead of them. it wouldn't surprise me if we see a marginal reduction in the ratio of bill issuance to coupons at the end of the month, maybe 60% bills / 40% coupons but that is truly unknowable. ultimately, my sense is by year end, equity markets will be lower amid higher inflation and a lot more worries for the market.
Thanks very much for your post. Would you please comment why short duration bills are positive for liquidity while long duration coupons are not? What is the assumed mechanism? Thanks.
1. Actually, I think January 31st QRA determines how the Treasury finances Q2, not Q1. After all, a third of it would have already passed.
2. I didn't know the Treasury aims to only issue 20% of the total debt stock in short-term bills. That's good to know!
3. I don't think the arguments to delay increased issuance based on the economy sticks: it isn't any more fragile than it were when JY increased issuance in late July.
Correct, and yes the econ argument was simply what they could use as justification...
Good resource from last QRA: https://home.treasury.gov/system/files/221/TreasuryPresentationToTBACQ42023.pdf
Thanks, Florian!
Thanks Florian. Question about income taxes on your short-term trading, I am sure you have answered this before for others. Do you live in a jurisdiction that is more advantageous to tax on short-term trading, or do you just accept taxes as a cost of business? Thanks in advance!
Hi there, I cannot really comment on that, not a tax advisor etc. But you can see where I am based, and then see the tax rules in that jurisdiction...
But are there any ISA providers in the UK that allow buying options?
Florian, as usual, a very well thought out commentary. I think one thing to keep in mind regarding the politics, which is obviously a wildcard, is that as you point out, inflation expectations are rising and given the last CPI reading was sticky high, that is likely to be a much bigger negative than any equity market rally is a positive for the country at large. so, Yellen needs to be very careful about fostering too much economic activity and concomitant inflation or that will act as a bigger negative I think. they have a very difficult dance ahead of them. it wouldn't surprise me if we see a marginal reduction in the ratio of bill issuance to coupons at the end of the month, maybe 60% bills / 40% coupons but that is truly unknowable. ultimately, my sense is by year end, equity markets will be lower amid higher inflation and a lot more worries for the market.
Thanks very much for your post. Would you please comment why short duration bills are positive for liquidity while long duration coupons are not? What is the assumed mechanism? Thanks.