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Gross PIMCO Exit Sparks Record Liquidations In Short-End Of Yield Curve
It appears wherever one looks in the markets there are the skidmarks of PIMCO adjusting to life after Bill Gross. First it was MBS (and related derivatives), then CDS indices adjusted as redemption expectations raised risk premia, and now it is the short-end of the Treasury curve. As The FT notes, 3-month Eurodollar futures (instruments enabling traders to bet on the front-end of the yield curve and thus more accurately pinpoint their bets on Fed actions) saw asset managers (cough PIMCO cough) liquidate a record 868,853 contracts in the week to September 30 – the largest one-week change on record (each contract has a notional value of $1m). This dramatic shift suggests both a disagreement with Gross' "new normal" view of rates lower for longer (since liquidation is concentrated around the 2-year maturities) and a need to meet liquidity requirements from redemption requests.
Mr Gross was a big buyer because of his belief in a “new neutral”, in which US growth would be slow and rates stayed low.
After Mr Gross left, Pimco said investors pulled $23.5bn from the Total Return Fund during September, a monthly record. Commodity Futures Trading Commission statistics revealed on Friday that asset managers reduced their long eurodollar futures positions by 868,853 contracts in the week to September 30 – the largest one-week change on record. Each contract has a notional value of $1m.
“The story has been a liquidation of contracts across the two-year part of the eurodollar futures market,” said John Brady, managing director at RJ O’Brien, the broker.
Pimco declined to comment about whether it was closing out eurodollar futures contracts.
Traders say that a large decline in open interest for very liquid eurodollar futures in Chicago over the past week suggests Pimco has cashed in holdings to meet Total Return Fund redemptions. They noted big changes in open interest for contracts that were favoured by the Total Return Fund, notably the December 2015 and March and June 2016 contracts.
And BofA adds,
The drop in Open Interest in front-end futures contracts, "indicates that short positioning was largely concentrated in the short end of the curve in anticipation of a change in the Fed’s forward guidance and/or shift higher in the dots," BofAML strategists led by Priya Misra said in Oct. 3 report, adding "much of the mileage from the dots for front-end bears is now behind us"
It's clear that overall positioning of the front-end (2Y) remains notably short, though last week saw a modest reduction in that short it remains near 7 year highs...
Charts: Bloomberg
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Of course, nothing to see here as usual.
Zero Hedge nails it-- CNBC viewers lose it all when Jim Cramer's stock pick goes bankrupt just one month later! http://tinyurl.com/q6crbmz
Bill's had a great run, time to retire to the Hamptons with good ol' Benny b and Timmy g.
Its not over till you die at your desk.
The front end liquidation was pretty easy to call. Its what that money does, and the etf's/broker products they panic run towards will really fuck with the tape. 7% to go.
A couple years ago I saw a video saying it would be time to be concerned when the big boys started to drop out of the picture and go to ground. Not quite enough of them yet but I'm watching.
To be fair, I'm not sure CNBS viewers even know what open interest is. This would all just be jibberish. Gotta keep it simple. Cramer hands out tickers and they buy.
What a lousy time for the Fed to be sitting there, constrained by their own tapering/ending of QE4. What a missed opportunity for them.
The Fee has just lost control of the short end of the yield curve.
We're clearly "running on gas"(fumes?) here.
Hello! Sherman anti trust act you phucking dipshits in DC????
Meanwhile...we're still tuning into the tele???
Bwhahahahahaha.
Ebola Outbreak in Spain is a huge deal as plan "rat in the maze" as (pre) programmed in the computer continues working overtime.
http://www.bloombergview.com/articles/2014-10-03/bill-gross-s-investor-o...
That's funny, thanks.
Gross is witty and with it nearly all the time.
Go long Gross.
Gross is to bonds as Buffett is to stocks.
dude, that piece was spoof, the author would hardly have access to "Gross's unsent email folder"
Hits keep coming. This is beyond crazy. Denial is a strong force. I am stunned things are as stable as they are globally (and they ain't).
Hey, how is that Tsunami coming along for TEPCO?
So...a lot of action on the craps table?
Funny how gambling is gussied up for the money-changers.
maybe they can next "liquidate" the debt of this NJ "conservative"
New Jersey Plans Biggest School-Bonds Sale Under Christie
http://www.bloomberg.com/news/2014-10-06/new-jersey-plans-biggest-school-bonds-sale-under-christie.html
New Jersey spent an average of $17,266 per public elementary-school student in 2012, the third-most among U.S. states, according to the Census Bureau. Only New York and Alaska spent more.
Like a Rhinestone Fed Chair
falling off her horse at the bond yield rodeo
A Rhinestone Fed Chair
Getting threatening letters from traders I don’t even know,
and Bill Gross cursing over the phone
Bond Tipping point ? Many have said on ZH the bond markets would tip over first as bondholders are not fiat crazy FX futures traders (but retirement funds) for the most part.
Gross-Pimco Effect
Called it here first.
The bond market king may take it down town.
I know that I know not a lot about what Pimco and their kind do (probably puts me in the same boat as a lot of their punters), but Gross's exit spoke a volume in any language.