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Presenting Today's Blatant Bond Market Manipulation (Or BLS Leak)

Tyler Durden's picture




 

Today is the second time in three months that someone, or something, either leaked the Non-farm payroll data just ahead of its official release, or if not leaked then a trading algorithm manipulated the bond market ahead of the official data release by launching a "momentum ignition" (see here, here and here for much more on how HFT uses this strategy over and over to set trading bands) launch higher just ahead of the official data release at 8:30:00:0000 am that desperately needed to push 10 Year yields, already on the verge of a 2 year breakout, lower.

The chart below shows how 3 seconds ahead of the official release someone started a buying spree before the actual reported BLS miss. This was followed by a trading halt in the bond complex as the machines reacted to the new "baseline" price in the 10 and 30 Year Treasury future, and proceeded to trade using the new momentum-ignited reference price as the reference level.

Via Nanex:

And zoomed in:

Was this a leak, or was it simply a programmed momentum ignition event designed to provide a higher high in the 10Y futures, and drag the bond complex higher - after all we live in a world in which algos are buying just because other algos are buying - which ahead of the BLS print was threatening to surge above the 2.7535% 2 year high in yield, and finally wake up stocks that soaring yields are here.

As a reminder, this is precisely what happened June 7 when a BLS released resulted in yet another bond market ignition and subsequent halt as described in "Here Is Today's 482 Millisecond NFP Leak, The Subsequent Gold Slam And Trading Halts In Treasurys And ES", although back then it was not nearly as blatant: the "momentum ignition" hit just 482 before the official release back then.

Here Is Today's 482 Millisecond NFP Leak, The Subsequent Gold Slam And Trading Halts In Treasurys And ES

 

What was more amusing was the action after the NFP release in both the eMini and the T-Bond futures, all of which had to be halted for a whopping 5 seconds until the algos, selling everything at first, got the memo out that good news today was in fact good news, and promptly ramped risk to the moon. Either that, or someone called in a code Red, made it so all selling was literally prohibited, and with the only path of no resistance up, resulted in today's epic melt up on what was initially a very bearish kneejerk response to the NFP print.

 

First: September 2013 T-Bond Futures trades and quote spread. The deluge of selling hits 482 milliseconds before the NFP release, leading to a 5 second circuit breaker and halting the OTR future contract of the world's largest bond market. Abe would be proud.

 

 

Meanwhile in equities, all liquidity disappeared. All of it.

 

Fear not though: the CFTC is on top of it. You see, when bond trading is halted two times in three months alongside of the most important monthly economic release, someone has a fit, and they scream at the CFTC. The Goldman-alumnus headed CFTC. So what does the CFTC do? They "review" it. From Reuters:

CFTC probing Treasury futures trading that led to halt at CME

 

U.S. futures regulators are reviewing trades that triggered a brief halt in trading at CME Group's markets for Treasury futures just as the U.S. government was poised to release key data on the jobs market.

 

"We are aware of it and will be doing a review of the trades, which is standard operating procedure for something like this," Commodity Futures Trading Commission commissioner Bart Chilton said in response to a query from Reuters.

 

CME Group halted trading in some Treasury futures for five seconds, beginning just before the 8:30 am ET (1230 GMT) release of the monthly jobs report.

 

Large trades in 10-year and 30-year Treasury futures were made just prior to the release of the report. Such trades and large market moves can trigger automatic stops in CME markets.

Of course, once the CFTC and CME both discover the ignition originated either at Liberty 33, at its proxy Citadel, or Goldman/JPM, the "review" will promptly fade into obscurity, or at best, the CFTC will "discover" that nothing actually happened contrary to irrefutable evidence to the contrary.

Just like in its investigation of silver manipulation. But at least Bart Chilton will sell more poetry books.

 

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