Today's 11-Sigma Bond Market "Fat Finger" In 3-D Animation

Tyler Durden's picture

This morning's incredible 6-month-range busting, 11-sigma, so-called "fat finger" in Treasury futures markets was brushed under the carpet by most of the mainstream media since it had no effect on what is important - US equities. However, as the following detailed charts from Nanex show, it looks like anything but an 'accidental' fat finger and merely highlights just how fragile the world's largest (and supposedly most liquid) markets have become. Still, with Virtu's CEO doing so well, how will it ever stop?


The 11-sigma spike in all its glory... (via Nanex)

(3-month front-month 30Y Futs intraday range mean is ~0.9 points and standard-deviation is ~0.5 points)

The 3-D animation...


And the still showing the bid-ask dissolves...


and the full break-down as multiple contracts were affected...

On December 23, 2013 at 2:37:51, Treasury Futures skyrocketed on heavy volume! Specifically, the March 2014 contract for the 30-Year (ZB), the 30-Year Ultra (UB), the 10-Year (ZN) and spread between the two (NOB). In 10 seconds, the 30-Year T-Bond moved 5 handles - the equivalent of the high-low range of the last 3 months.

1. March 2014 30YR T-Bond (ZB) Futures

2. March 2014 30YR T-Bond (ZB) Futures. Zooming in on 18 minutes of time.

3. March 2014 30YR T-Bond (ZB) Futures - showing quotes.

4. March 2014 10YR T-Note (ZN) Futures.

5. March 2014 10YR T-Note - 30YR T-Bond (NOB) Futures.

6. March 2014 30YR Ultra T-Bond (UB) Futures.

7. March 2014 30YR Ultra T-Bond (UB) Futures. Zooming to 27 seconds of time.

8. March 2014 30YR T-Bond (ZB) Futures. Zooming to 27 seconds of time.

9. March 2014 10YR T-Note (ZN) Futures during same time period as charts 7-8 above.

10. March 2014 10YR T-Note - 30YR T-Bond (NOB) Futures during same time period as charts 7-9 above.


Source: Nanex

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Truther's picture

Very eerie indeed.... Can someone do it "fatter" if they dare?

SAT 800's picture

I have short positions in ZB; but no stop order; so it had no effect on me; fortunately, I wasn't paying attention. Now the market is back where it started; slightly in profit for my short. Sometimes little parties like this are thrown to collect stop orders; which would imply that the market is headed lower. I really like this trade; it's almost inconceivable that ZB could do anything but continue in it's well established down-trend.

Truther's picture

It couldn't have been fat Ben would it?

A82EBA's picture

so what does all that mean?

Rainman's picture

Bloomberg doesn't homepage the 10y bond chart no mo !

seek's picture

It's interesting, any time there's a charge that would expose TPTB's plans, it disappears off Bloomberg.

They used to have a linkable chart to CME gold inventories, and that one disappeared a month or so before the big April takedown, when you could see the CME (and JPM) was beign bled dry of AU.

Rest assured, in 2017 when the DXY disappears off of Bloomberg, it just means everything is OK.

ChaosEquilibrium's picture

Bloomberg also had the Italian and Spanish....daily 10yr Bond yields....until they started blowing out and you could see the FED and ECB intervening....BOTH disappeared within days!


Bloomberg is a Thieving Fraud!


sixsigma cygnusatratus's picture

The Fed started that crap when they stopped publishing M3 in 2006.

Stoploss's picture

The bid stack collapsed...

That's not good umkay...

Rainman's picture

I love the smell of illiquidity first thing in the morning. Not a creature is stirring.

Chart porn of the year !

disabledvet's picture

a 40 percent correction in Facebook should get people's attention. the next time they won't be able to break these trades. this ain't penny anty equity land. this is the largest, most liquid market in human history.

sixsigma cygnusatratus's picture

I see.  These standard deviations go up to 11.  So that's much better than six, right?  Perhaps Yellen will dance a little jig around Stonehenge next...

Colonel Klink's picture

Yeah I've heard six shmegma training is now 11 shmegma now with inflation.

Cognitive Dissonance's picture

One day 'they' will need to 'bust' an entire day of trading. Then a week and so on.

<Coming soon to a market near you.>

Colonel Klink's picture

That's an amazingly coordinated "fat finger".  I like how it just kinda slowly let off the key.  So expertly done, it's like they've done it before!

max2205's picture

Awaiting the list of casualties

assumptionblindness's picture

Has Nanex posted the charts from the Russell 2000 this morning yet? Up almost 6% in the pre-market.

NoWayJose's picture

The real issue with this and all the other 'fat finger' blips is the destruction of any trust in the markets.  When the Fed is forced to withdraw from its funny money games, who will take their place?  How will US (and global) corporations raise the money they need for capex or anything else?  Not only are we looking at the Fed pulling out (eventually), but when they do, there is no 'real' non-algo controlled market for corporations to go into to raise funds.  Arguably, the availability of 'funds' from the market is what let American corporations grow into their dominant global positions (even if in the last 15 years they used that money to close US factories and open factories in China).  What the Fed and the lax regulations on algos is doing, is destroying the capitalist monetary generating mechanism within the US.  Of course, China doesn't mind, as its state owned companies can get all they need from the Central leadership.  Ultimately, the future inability of companies to raise funds will further hasten the decline of America...

Dr. Kenneth Noisewater's picture

Is that a lot of sigmas?

Urban Roman's picture

Watching your avatar .... did you say something?

Oh, yeah. It's a lot. To put it in simple terms, the tail isn't usually fatter than the dog. Especially when it's a really really old fat dog.

Colonel Klink's picture

Or a Kardashian!

EDIT:  Same thing, just simplified into one word.

tnquake's picture

The FED has determined from scientific deductive reasoning, after removing their heads from their arses, that what you just witnessed was the "Bernak Erection Ambiguity".

Happy 100 years!

navy62802's picture

Sort of looks like NANEX got a hold of Matlab and just went crazy!!

nanex's picture

Matlab. Heh. That's custom code..

magne13's picture

Guys this is not a fat finger it is a predatory algo, the premise is simple rule 588 of the cme rulebook has a no look provision of 30/32 meaning if the price deviates past this , the minimum the CME can punish is 30/32 and it is seemingl y used as a maximum not a minimum, I sold bonds at 133-29 and the CME marked them down to 131-12 using the 130-14 catalyst point and the 30/32 rule.  So for any of you hot shot algo HFT shops the CME has opened the door to go long any 1 pt OTM option, and overnight algo smash the market to the point where you can delta hedge your option positions and then cover all the contracts used to get the market up to or down to that point as more bids and offers come in do to the chase, then there you have it a simple way to completely cover an option with a simple predatory algo with the CMEs lack regulatory action.  In fact the bonds don't even have a limit for some reason, at least not that I know of and why is that? no safe guards, no gaits, stop threshold limits...who is the CME really facitlitating?  This would have never happened on the floor and it is why electronic trading is a rigged system.

Promethus's picture

Every three to five years we get these double digit sigma events that are suppose to happen one time in the life time of one hundred million universes or some such nonsense. You don't have a standard bell curve distribution, just a big fat tail. Big Sigma (BS) events are just big fat tales.

SAT 800's picture

Yes, that's correct. That's one of the points that whats his name was trying to make in his book that wasn't about black swans; (senility, it happens to everyone, if they're lucky).

WhiteNight123129's picture

It is an attempt to snuff the shorts.

Those idiots assume that the Shorts are using the rigged future market subject to margins.... Pff...

You can short 30% of your portfolio with strip and these idiotic moves on the futures will no impact on your portfolio, none. 

The shorts are patient, they own Gold and are shorting the TSYs at every occasion. Right now is not a good time.

Wait for some bad economic news to come out, some rally to occur in TSY and short the sack of shit (TSYs).


Flakmeister's picture

Do you always project so strongly?


WhiteNight123129's picture

Yes I was forecasting that, Was shorting the treasury strop on the 30 years were under 3% at 2.6% to be precise. It was not a certainty but reading old books, Henry Thornton described this phenomenon in a book written in 1810. A country with large external debt would see the rate on the long bond rise not because of recovery or whatever, but because foreigners would ask higher interest rates in compensation for falling currency. Then the rates would actually trigger inflation by making the breakeven cost of key commodities rise (Thomas Tooke). Today that would be your shale-oil company very leveraged refinancing at higher nominal rates. This in turn woudl feed into prices, into inflation expectation and into higher bond yields which would come back in circle on the nominal break-even cost of oil extraction.