Elon Musk Says Treasury Bills Are 'No-Brainer'. What About Long-Dated US Bonds?

Musk's voice joined growing chorus on Treasury market, and said short-term Treasury bills are "a no-brainer."

On Thursday, Warren Buffett said he had been buying Treasury bills in recent days and would likely continue. "The only question for next Monday is whether we will buy $10 billion in 3-month or 6-month" T-bills.

In contrast, Ackman said that his firm was short 30-year Treasury bonds, both as a hedge against the impact of higher rates on stocks and also as a "standalone" bet. Ackman added on Thursday that Pershing uses shorter-term bills for cash management, echoing Warren Buffett.

Here is a table showing the auction sizes from the May-to-July 2023 quarter (in billions of dollars), and the expected sizes in the coming three months.

A couple of points in the table above:

● The rise in long-term debt sales will be front-loaded, with the biggest jump in 10-, 20- and 30-year debt coming this month.

● Issuance of shorter-maturity notes (2s, 3s and 5s) will rise in a steadier fashion.

This makes sense if the yield curve is on its way to un-inverting itself at some point in the next year; it's better to sell more long-dated bonds when long-term rates are relatively low. Strategists at CreditSights expect the yield curve to right itself in the next year. Other banks, such as Deutsche Bank, frame this as "increasing term premium", which is sort of a catchall term for a steeper (or less inverted) yield curve.