CME Saves The Best For Friday 6 PM Last, Lowers Treasury Bond Margins

Tyler Durden's picture

Just in case the broad speculator public did not get the message earlier this week after the CME lowered ES margins, just in time for the market to sell off and send realized vol surging (while of course ignoring plunging vol in gold, silver and all other commodities), the CME has completed the "paint by Rahmian numbers" puzzle, and has made clear which other asset class has the investment "go ahead" by the administration. As of a few minutes ago, the initial and outright margins for 10Y and 30 Y Treasury Bond Futures, 10 Year On The Runs, 7 Year Interest Rate Swaps and LT US Treasury Bond Futures were all lowered by up to 19%. Good thing the move comes 4 weeks before the end of QE 2. Were it to just precede, or, gasp, coincide with June 30, one may get ideas that this is not quote unquote risk management, such as that expressly not exhibited by the CME's refusal to hike ES margins following their cut, but is nothing but another glaringly obvious means of directing speculative capital into preferred asset classes.


Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
GeneMarchbanks's picture

This way please... come on in all is well keep looking straight ahead.

dlmaniac's picture

Will someday offer tax breaks if you are willing to sell gold & silver to buy and hold 30Y bonds instead.

HoofHearted's picture

Some day my ass. They already do it. Notice that silver and gold BULLION is considered a "collectible" and gets its own special tax rate while throwing your money into stocks gets you different kinds of rates depending on how long you hold. And then there are such things as tax free muni bonds...It's already happening...and then they have to go all in by lowering margins on the stuff they want to herd you to while raising margins on the real money...

I'd be speechless if I hadn't already seen this game many times...


In Fed We Trust's picture

That one is a no brainer.

The bond market will be the next "big short."

To ensure all of Pimco's friends can get on this one.


Of course as the bond market tanks I have a feeling that the stock market with go to .....


who knows how high, but in the end there will be but just 2 -3 players at the table, who will bet it all , to get it all...





Blorf's picture

No kidding, everyone please Wile E. Coyote over the edge as far as you can run.  The bag you're holding will act as a flotation device for your corpse should you reach terminal velocity while over water.

It hasn't been even a week since they lowered ES margin despite higher volume right before it cratered. 

Boston's picture

What a nice surprise.

After being bullish on Treasuries (mostly 10 year) for over two months, I sold some this morning.

But after reminding myself of my own mantra (stay long Treasuries until AFTER QE ends), I went all in again at 4:30pm today (but mostly 7 year).

Thanks CME!  I like the way you're thinking.....for a change.


Hansel's picture

The USD index acted sickly today.  If treasuries are the place to be, one would think the dollar would rally as well.  Something's brewing...

Boston's picture

Good point.

1. I think the "run to mama" rally in the USD is still ahead of us.  Look at how the DXY spiked a bit in advance of the big sell-off in the S&P last year.  When/if the SHTF in risk assets, after QE2 ends, then the dollar will likely soar, albeit very temporarily if the Fed steps in to save the day.

2. I'm not long Treasuries without some serious risk management in place.  I've got stops protecting every dollar of my long exposure.

HowardBeale's picture

Everyone (mostly) was wrong on the dollar collapse in '08; thus, some dark force seems to have capitalized on and extrapolated that error forward in time and grey matter, just past the surprised and lonely, unimaginative dendrites of the masses, having convinced most that the dollar is headed for another rally for pretty much the same reasons as before--though it rightfully should crash and burn in spectacular fashion, being twice as fat and 10-fold as ugly as it was last time the invitation was offered. Thus, I'd like to hear the mechanism (and that is what it would be, purely an automated instantiation of momentum and the lack of free will) that could be responsible for any dollar rally at this point. Anyone?

WonderDawg's picture

Yeah, two words. Deflationary depression.

Xibalba's picture

something vicious this way comes...

Manthong's picture

Attention K-Mart Shoppers!

Over at the flashing blue light you will find tremendous bargains on these great, must have products...

hedgeless_horseman's picture

Searching for yield?   Ignore Timmy's flashing blue light!

Head West to the Golden State for REAL returns...


cpnscarlet's picture

It's not so much the manipulation, but the BLATANT manipulation that has me hitting the bottle much more often. I just slug down Crown Royal and masssage my SAEs.

Rainman's picture

Friday after close is when the really sneaky shit hits the wire. The WeinerGate distraction helps too. Cheers.

TheGoodDoctor's picture

My thoughts as well. However, could something break if they are allowing further leverage?

TheGoodDoctor's picture

I was wondering if something like this was going to happen. If PIMPCO has all that cash is it possible that they themselves will be QEIII?

ratso's picture

Beware of the CME when it gives a gift like lower Treasury margins

 "Gift" in Swedish means poison.

cossack55's picture

Knowing what the C in CME stands for answers all the questions you may have.

Hugh G Rection's picture

C'mon now, when has there ever been corruption in Chicago?

GetZeeGold's picture


Normal operating conditions.



richard in norway's picture

should i short bonds or would that just be silly

GeneMarchbanks's picture

silly, methinks. But use the Krona I heard the squid was doin' it

mynhair's picture



Yen Cross's picture

 I wanna hear more about those cd's being issued in Hong Kong. I China serious about offshore bond purchases. AKA floating the YUAN? Albeit in Hong Kong. Is China going to keep rinse washing Treasuries or diversify more, into financially strapped over valued corrupt Europe? The real SOOie called value in the Euro is a giant Porky PiiG backed by China!

Tracerfan's picture

Herding the sheep to the slaughter.


Smartie37's picture

Hang on, she's gonna blow !!!!!!

Number 156's picture

..another glaringly obvious means of directing speculative capital into preferred asset classes.

If this fails, theres always legislation.


Yen Cross's picture

  Your youth is blatant! Stand clear.

So Close's picture

Does anyone remember when we used to look forward to Fridays and 3 day weekends? 

faithfulwatchman's picture

You know if they shake us hard enough they'll get every last drop of blood out of us... Yet, it really only hurts when I think about it too much...

Hey, I got it! This could be a new Survivor/Rollerball reality show hybrid. Six nights a week drama and double elimination rounds. Plenty of blood, guts, and popcorn... Lots of distractions to occupy the sheeple and in the Season One finale you will see microsecond HFT execution challenges by the finalists and the losers receive real executions! Brilliant!

OUCH! Thinking too much again. So Sorry...

ArkOmen1's picture

Buying this thing and that thing is..... OK!

Buying THAT stuff, like that black stuff or shiny stuff.... That's not OK!

1984 wasn't supposed to be a handbook guys! But by you doing these things.... That will just cause more of what you don't want. Ah the rise of fascism in America. But how long until they get aggressive? Like physically aggressive?

Come and take it! Come and take it! I'm buying it bitchez and I'm not gonna stop!

snowball777's picture

Say boys and girls don't you want to have fun 
Why bother to walk when you'd rather run 
Why bother with books when you've got a gun 
Come fly with me right into the sun 

Fly like a vulture, fly like a vulture... 
Say boys and girls don't you want to have fun 
Why bother to crawl when you'd rather run 
Why bother to walk when you'd rather fly 

Come join the party way up in the sky 

In concentric circles we'll carve up the sky 
Looking for a big surprise 
Fly like a vulture, fly like a vulture... 

mhjhnsn's picture

This should be an insider trading scandal, but the govt won't touch it.  CME just gives a wink to its favored people (like its board members and friendly pols) and they can get a trade going that will do great when CME announces the margin change a couple of days later--otherwise none of this makes sense.

agent default's picture

Yeah well fuck them.  All of their moves indicate that they expect PMs to head significantly higher in the mid/long term.  Act accordingly.

dcb's picture

I be sticking with my call of about 1200 on the s and P by fall.

Clowns on Acid's picture

So now, instead of analyzing markets for what free thinking investors may buy (or sell), based upon market principles - we wait for what a Princeton professor and a tax cheating career civil servant will cook up next!

It's like being at a circus andtrying to predict what the clowns (on acid) will do as their next act.

ArkOmen1's picture

Buy all the treasury bonds and shares of the exchange traded fund SPY you want. In fact, speculate! But wait! You want to buy gold and silver? Hmmmm.... Let me ask about that. That might not be something we want you to buy. Yep. They aren't things we want you to buy. We also don't want you buying oil. Yes, don't buy gold, silver, or oil. Gold, silver, oil, bad. SPY and treasuries, good. Push that button and take that pill. Not the other ones. Be good.

Tangurena's picture

What are "ES margins"?