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Treasury Curve Flattens Despite Yesterday's Record-Setting Steepener Trade
The spread between 30Y Treasury yields and 10Y yields tumbled 4-5bps today post-FOMC back to its flattest in 4 weeks as hawkish sentiment sparked bond-selling out to 10Y and buying at the long-end. The reason this is notable is that yesterday, as Nanex details, there were two "monster" sized trades in 10Y and 30Y Treasury Futures putting on a significant steepening bet.
Overall market reaction so far...
Curve flattening post FOMC...
This is interesting though...
Meaning the following trade is hurting... (via Nanex)
Record Treasury Futures Trades
Monster buy in the 10-Year and sale in the 30-Year a day before FOMC
On October 28, 2014, there were two monster sized trades in Treasury Futures, a 26000+ contract trade (sale) in the 30-Year T-Bond (ZB) at 12:08:23 and a 29000+ contract trade (buy) in the 10-Year T-Notes (ZN) at 12:17:42. We know the 10-Year trade set a record for most contracts traded in 1 second for that contract since at least 2005 (the 30-Year may have as well, but we haven't completed a thorough check of the data).
What made this event even more interesting, was that an equivalent huge order in the opposite direction first appeared 3 minutes before the trade in the 30-Year and exactly 2 minutes before the trade in the 10-Year. That is, buy orders totaling about 27000 contracts started appearing in 9000 contract lots at 12:05:21 in the 30-Year - which were executed against by a large 26000+ contract sell order just over 3 minutes later, at 12:08:23. In the 10-Year, sell orders in lots of 9500 contracts started appearing at 12:15:42 and were executed against exactly 2 minutes later at 12:17:42. The two charts below show this sequence of events.
1. Depth of book for the 30-Year (ZB, left) and the 10-Year (ZN, right). (how to read these charts).
The white vertical lines in the middle of the top section are trades. There are 10 levels of bids and 10 levels of offers - each color coded by how many contracts are available to instantly buy or sell. The red indicates the highest relative to other levels. Most of the levels are deep blue because they are practically empty, relatively speaking, when compared to those huge orders in the top few levels.
2. Chart of the most contracts offered for sale in the top 3 depth of book levels for every second since 2008 in the 10-Year Treasury Contract (ZN).
Each day is drawn as one line from left (starting at midnight or 0:00) to right (and ending at midnight 24:00). Days are color coded by age - with red being the most recent and violet the oldest - with the exception of October 28, 2014 which is a thick purple line for contrast. Since at least 2008, there has never been as many contracts for sale in the top 3 levels of CME's depth of book for the 10-Year Treasury Contract.
3. Chart showing the most contracts traded in any one second for the 10-Year Treasury Contract (ZN) since 2005.
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The treasury curve is flatter than _____.
no matter what the FED tries... they cannot keep yields up.. they only fall... ZB some 17 clicks off pre QE3 end low..
http://www.hedge.bz
flatter curve squeezes banksters NIM (net interest margin) ... heh heh
might have to settle for 7 figure bonuses instead of the 8 figure ones
Yellen's curve flattens as Murkle's yield spread widens.
Yeah well Gold is getting hammered again...Fuck tribe money changers.
Miners are also getting the "shaft".
I always thought Debra Messing was a cutie
With rates at the short end going nowhere for the long and foreseeable future, you have to be mad to think the long bonds will rise then. US is the new Japan.
I bet by Friday they'll all be jawboning QE4 again, probably only take a 1% move to send Wall St Fed into full hysteria.
The only conclusion you can draw is that primary dealers, hedgies and perhaps even the NY FED are huge gamblers in the long-term treasury futures market, and have driven an explosive growth in the size of the market in the last 2 years - so much so that it is not in sync with the reality of the cash market daily trading activity in 30 year bonds (for example).
In other words, these poker players make enormous and silly bets in futures wagers, while a freight train of institutional players and real demand drive prices in the real world of the cash market. When huge inflows come into the relative iliquid (as institutional buyers don't sell, don't day trade) long-end of the treasury market, there is simply no paper to be bought at the artificial prices dictated by the futures market, which are much too high.
In other words, a NY FED driven sh*tshow.
don't doubt what you're saying ... but think of lot action coming from overseas
(relatively) high yield + stronger USD makes treasury market attractive for carry trade
"Put this on 30-1 double sixes, and get me another Scotch."
Thank you Tyler.
10s30s should be called the new widowmaker. It is the backwoods compared to 2s10s and it took some serious balls to do this in the ultralong. My condolences.