10s Turn Special Repo

Tyler Durden's picture


Because nothing says "perfectly functioning, centrally-planned bond market" like the most liquid OTR treasury security of the world's biggest bond market trading special repo. From SMRA: "The overnight General Collateral rate edged up to 30 basis points this morning. The 10-year note turned special and was trading at -5 basis points compared to 7 basis points yesterday." Yes. Yes it did. And if you think this is bad, just wait until Ben announces QE4 on December 12 and commences to monetize everything east of the 7 year unsterilized: finding any bond non-special will be a truly amazing feat as the Fed proceeds to take over the entire bond market.

And yes, the paradox here is that in a world away with liquidity suddenly there is none and potentially may explain why there is suddenly a big reliquification, i.e., selling, via gold.

Via: Stone McCarthy

Your rating: None

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Tue, 12/04/2012 - 10:19 | 3032226 TruthInSunshine
TruthInSunshine's picture

Place your bets (or choose not to play).

I genuinely wonder what, among others, one Michael Burry would have to sincerely state about the Bernank'd markets at this point in the absolute farce.

Oh, by the way, those of you in foreclosure on properties owned by government GSEs (i.e. a majority or at least significant plurality of such properties in the New Amerikan Normal), happy holidays, bitchez:

Fannie, Freddie Halts Foreclosures For the Holidays

Tue, 12/04/2012 - 11:45 | 3032490 Manthong
Manthong's picture

There’s no place like home for the holidays.

Tue, 12/04/2012 - 11:47 | 3032497 prains
prains's picture

Does that mean when they Repo my car they'll give me money back??

Tue, 12/04/2012 - 10:28 | 3032266 Dr. Engali
Dr. Engali's picture

Bubbles get all frothy at the top. Old cool hand Bernank has this well under control, if anything happens he can take care of it in  minutes. I know this because he said so on  minutes, and the Bernank has never lied before.

Tue, 12/04/2012 - 10:31 | 3032277 LawsofPhysics
LawsofPhysics's picture

Yes. he also said he would "never directly monetize" anything.  We all must have faith in these "professionals".

Tue, 12/04/2012 - 10:06 | 3032172 SheepDog-One
SheepDog-One's picture

Who will be the one to stop these maniacal monetizers?

Tue, 12/04/2012 - 10:09 | 3032195 fonzannoon
fonzannoon's picture

Me. I will be the one.


Okay let's give it a minute.

Tue, 12/04/2012 - 10:12 | 3032207 JPM Hater001
JPM Hater001's picture

Anyone know any camp songs?

Only one I know is "Sold me down the river."

Tue, 12/04/2012 - 10:26 | 3032261 semperfi
semperfi's picture


Tue, 12/04/2012 - 11:09 | 3032395 TruthInSunshine
TruthInSunshine's picture

Give me the ability to conjure monopoly fiat at zero cost basis, meaning that my risk of loss is a commensurate zero, no matter how insane my actions, and I promise to monetize all the debt that can be floated.

Tue, 12/04/2012 - 10:06 | 3032175 Dr. Engali
Dr. Engali's picture

Maybe the Bernank should buy up the rest of the bond market, and really blow this thing up.

Tue, 12/04/2012 - 10:08 | 3032192 Cursive
Cursive's picture

@Dr. Engali

I have a mental image of BernanQE saying, "I love paaayyy-per."

Tue, 12/04/2012 - 10:27 | 3032262 CPL
CPL's picture

I understood that Bernake has been the only buyer of bonds. 

Tue, 12/04/2012 - 10:08 | 3032181 holdingontomypants
holdingontomypants's picture

Ain't that special...and gold is taking a dump...sounds like its time to buy some more today.

Tue, 12/04/2012 - 10:31 | 3032233 Glass Seagull
Glass Seagull's picture

They won't want the position showing up on the CFTC commitments report.  They'll cover.

Tue, 12/04/2012 - 10:09 | 3032190 tooriskytoinvest
tooriskytoinvest's picture

Buy On Dips: Buffett’s Gen Re Sees “Tendency To Higher Gold Prices” As GOLD EAGLE SALES EXPLODE IN NOVEMBER, UP NEARLY 4 FOLD YOY


Tue, 12/04/2012 - 10:18 | 3032234 Quinvarius
Quinvarius's picture

I need to see a lot more buying than that before I am convinced the public is coming to blow this market up.

Tue, 12/04/2012 - 10:09 | 3032193 LawsofPhysics
LawsofPhysics's picture

Paying uncle SAM to lose your savings - "winning"

Tue, 12/04/2012 - 10:10 | 3032198 govttrader
govttrader's picture

10's trade special in repo at the beginning of almost every month as dealers and other mkt participants sell the month-end extension and get short in prep for the upcoming 10yr and 30yr auctions.  This usually dissapears by the settlement date (the 15th of the month) of the auctions.  During times of economic distress, december tends to be a strong month for US Treasuries in general, so this is completely expected.

Tue, 12/04/2012 - 10:13 | 3032211 fonzannoon
fonzannoon's picture

wake me up when the 10yr goes negative.

Tue, 12/04/2012 - 10:17 | 3032228 LawsofPhysics
LawsofPhysics's picture

I wonder if that would happen when the bernanke is buying 100% of the market?  Does anyone here really think that the reserve status will remain intact much longer if that happens?

Tue, 12/04/2012 - 10:20 | 3032240 fonzannoon
fonzannoon's picture

I asked that exact question on here last night. More specifically what happens when the fed buys 100% of the market and decides to hold everything until maturity. So the idea of the fed unwinding this mess is now a goner. Then what? What cracks first? The currency? That is ny guess.

Tue, 12/04/2012 - 10:29 | 3032271 LawsofPhysics
LawsofPhysics's picture

"decides to hold everything until maturity."


Right.  Now who would exactly honor this paper again?  Is there an entity backstopping the Fed that we don't know about?  Go ahead, hold them to maturity, then pay yourself back with money you printed.  Are there more players in this circle jerk that I don't know about?  All I see is the Fed and their primary dealers.  If this should come to pass, people will be trading all kinds of physical  assets and bartering with livestock for christ sake.  Tax collection in the U.S. will be just like tax collection in Greece, nonexistent.  Inflation  is a far more incidious form of theft, but admittedly, both are theft.

Tue, 12/04/2012 - 10:24 | 3032255 SheepDog-One
SheepDog-One's picture

Right, who the hell will be left when the FED is just buying 100% outright? Where does money for Obamaphone come from is what I'm wondering....turn those off and we got real trouble on our hands. I guess there's no worries though, GOP just offered up $2.2 trillion scalps or something.

Tue, 12/04/2012 - 10:31 | 3032278 Flakmeister
Flakmeister's picture

It all depends upon the House of Saud, or more precisely, the rulers of Saudi Arabia... When they say no mas to the dollar is toast...

Tue, 12/04/2012 - 10:37 | 3032293 LawsofPhysics
LawsofPhysics's picture

But wouldn't we simply "liberate" them again?

Tue, 12/04/2012 - 10:42 | 3032321 LeisureSmith
LeisureSmith's picture

The House of Saud have many luxuries, but that one they have not. I think of it moore as a symbiotic or M.A.D. relationship. If they ever say no mas,  a deal was made. But then again, they might try to fuck eachother.

Wed, 12/05/2012 - 01:39 | 3034830 AGuy
AGuy's picture

To Answer your question you first have to ask why is Euro still bailing out Greece and why Hedge funds are still buying\holding Greek Debt. Before common sense lands in america its going to half to land in Greece first.  For now it appears the farse will continue for some time.

Tue, 12/04/2012 - 10:42 | 3032317 resurger
resurger's picture

Looks like a  REPO bubble to me

  If AAA securities (not just in the US) were repoed to raise funds for 10 years on -Ve LIBOR + CDS Country spread ... you can actually make lots of money, if you are doing this in the US, you are making money on your borrowings or am i mistaken here?!

Tue, 12/04/2012 - 13:11 | 3032754 Againstthelie
Againstthelie's picture


is my understanding of your comment correct?

At the beginning of the month the owners of 10s make a REPO (sell them) and use the cash to go short in prep of the 10s and 30s auctions?

Why? Answer: Because auctions mean more supply of 10s and therefore prices tend to go lower. Afterwards they close the shorts and repurchase the 10s.


Tue, 12/04/2012 - 10:10 | 3032199 LouisDega
LouisDega's picture

In other news, Three weeks until Christmas. Merry Christmas ZH

Tue, 12/04/2012 - 10:14 | 3032214 JPM Hater001
JPM Hater001's picture

Don't you tell ZH what kind of a Christmas to have.


Central planners all of them.


Tue, 12/04/2012 - 10:31 | 3032274 resurger
resurger's picture


Tue, 12/04/2012 - 10:14 | 3032218 Shizzmoney
Shizzmoney's picture

I hear Geithner's desk at the NY Fed was covered in Tulips.

Tue, 12/04/2012 - 10:21 | 3032247 caimen garou
caimen garou's picture

I agree,tulips with a nice warm layer of horse shit.

Tue, 12/04/2012 - 10:42 | 3032319 nonclaim
nonclaim's picture

Those are not the bulbs you should be hoarding ...

Tue, 12/04/2012 - 10:29 | 3032265 FubarNation
FubarNation's picture

That is like Wimpy asking you to pay him Tuesday for eating your hambuger today.

I'm sure this will all end well.

Tue, 12/04/2012 - 10:28 | 3032267 LeisureSmith
LeisureSmith's picture

"Special" seems oddly appropriate.

Tue, 12/04/2012 - 10:36 | 3032289 resurger
resurger's picture

Am looking towards the 30 Year NREPO Rate

Tue, 12/04/2012 - 10:36 | 3032291 Confundido
Confundido's picture

They will wait until 10am-11am to launch the final stop hunt assault and sink gold below $1,688/oz, to go to $1,660/oz. 

Tue, 12/04/2012 - 10:49 | 3032340 Confundido
Confundido's picture

Good, now they are in position. They took gold to $1698-99, and need the typical $10/oz sell off to target $1,688, by 11am.

Tue, 12/04/2012 - 11:23 | 3032433 Confundido
Confundido's picture

10:22am...in position to launch the final assault on gold....to go to $1,688/oz and beyond.

Tue, 12/04/2012 - 10:38 | 3032294 moneybots
moneybots's picture

" Does anyone here really think that the reserve status will remain intact much longer if that happens?"


Nothing occurs in a vacuum.  Everybody else will just print to push the dollar UP and trash their currency more.  The dollar will remain the reserve currency by default.

Tue, 12/04/2012 - 10:48 | 3032336 LawsofPhysics
LawsofPhysics's picture

Right.  Now remind us, how much world trade was performed in dollars this year, last year, 5 years ago, 10 years ago, 20 years ago?

Well hey, it's good to be optimistic and yes "default" is in the future.

Tue, 12/04/2012 - 10:58 | 3032355 virgilcaine
virgilcaine's picture

Wait until the GGB's start getting sold..some juicy profits sitting on that pile of _____. Bernank is the Farmer tilling the soil of ____ & the Crop is ready to be harvested.

Tue, 12/04/2012 - 11:18 | 3032410 poor fella
poor fella's picture

When do I GET PAID to take on a mortgage?

Hmm, then I'll rent it out! And have MORE income and GET PAID and take on ANOTHER mortgage and RENT IT, and GET PAID! Then I'll buy Toll Brothers and GET PAID to BUILD HOMES and sell them to MEEEEE! OMG!!!!! Trump ain't SHIT! I could become THE FIRST TRILLIONAIRE by the end of the year. Can't wait to build my catamaran to beat the shit out of Ellison. I'm going to magically appear wherever william and kate vacation and pick up on her. He wears clown shoes and surely ain't no trillionaire. 

One day, I'll BUY THE FED!    ('cuz if you can't fuck it, BUY IT)! 

Tue, 12/04/2012 - 11:29 | 3032450 Downtoolong
Downtoolong's picture

Kevin, can you come into my office please.

It's sooo easy to pay up with other people's money. If only the Fed balance sheet was truly the responsibility of the Banks. That's the myth and the con, it isn't. Practically speaking, it's yours and mine.


Tue, 12/04/2012 - 12:14 | 3032589 Confundido
Confundido's picture

See my points above...we're a bit late today, but after topping at $1,700/oz we have the second wave of selling. They need to close today below $1,704/zo and obviously, to break through $1,688/oz. We should get there today or tomorrow.

Tue, 12/04/2012 - 16:26 | 3033383 nostromo17
nostromo17's picture

Dear Tyler D: A Little Repo Knowledge could go a long way here at ZH...

Its not so uncommon for the current ten year to go special....the current ten year is considered "the most liquid" of ten year bonds and consiquently is also in great demand from time to time. Flight to quality where bonds represent quality can tighten supply as well. Also since bonds are lent on average about 5 times (leveraged 5x's) unwinding the daisy chain of lent bonds can get mucked up when one party would rather pay the penalty rather than return the lent bonds...

So in this case ZH is making a mountain out of a so far mole hill and dragging the FED into 10 years going special is basically irrelevant.

More sensible theorizing beyond simple supply and demand issues regarding the current ten year might be in order if it remained special in a sustained manner for days or weeks (or months) and would likely point to a repo player and not the fed if the latter was the case.

Seems like harping on your favorite themes is leading to some nonsense here, too bad. --I don't like the current Fed Regime either, but its better to indict them for what they do than what they don't do, don't you think?




Do NOT follow this link or you will be banned from the site!