When Does T-Bill Rates "Adjust" To Upcoming FOMC Rate Adjustment?

Observer | Jan 23, 2023 | 8 posts since 2022

We can see (short term) past weekly auction rate results for T-Bills of various duration, but wondering if it makes sense to wait until an upcoming expected increase is made official to yield the best short term rate? If so, the day after or about a week after for things to "catch up/adjust"? Or, are the rates currently "priced in" with the expected increase, hence doesn't really make a difference?

It would be easier to answer by myself if I could find historical data that I could cross against rate hikes/decreases to see average results on rates, but was unsuccessful.

Thanks!

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Answers

w00d00w | Jan 24, 2023 | 360 posts since 2012

FWIW, the most recent 4 week T Bill auctioned at 4.558% so if the Fed raises 25 bps to a 4.5-4.75% range, then the 4 week has already surpassed that lower bound. by comparison, after the previous rate hike, it took about a month for the 4 week at auction to reach the new lower bound of the Fed funds rate. so the upcoming change looks to already be partially priced in.

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