Massive Short Squeeze, Flight To Safety Pushes 10 Year Yield To 2011 Low 2.77%

Tyler Durden's picture

The unprecedented moves in the yield curve continue: even as the blow out in (ultra) short term liquidity persists, notably in GC and in Bills maturing just after the August 2 D-Day, the scramble to cover long-dated shorts has collapsed the 10 and the 30 Year by an epic amount in the last few days, with the 10 Year trading at 2011 lows of 2011. Why is this number relevant? Because the last time we saw it was in August 2010, a few weeks before Ben Bernanke announced QE2. In other words, history is repeating itself verbatim from last year. As to whether the move is due more to a flight to safety or a short covering crunch we will know only next week when the CFTC releases its latest COT spec short data. One thing can be ascertained, however: the Fed models that look at rate-implied deflation indicators are currently screaming bloody QE. And it will come... As soon as the stock market finally realizes that it has to tumble before it surges to new and Weimerian highs. In other news, keep an eye out on the USDJPY: we may see a flush there any second.

10 Year:

30 Year

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Mongo's picture

Flight from Ponzi - The Great Escape

slaughterer's picture

10-Year has to go to 2.4% before BB makes his move.  10-year is not really that bad yet. 

No QE3 in 2011.

No announcement in Jackson Hole this year.

Wait and see until 2012.

Fed needs to observe the growth rates after debt-ceiling rise and under non-QE conditions for the next few months.  Two regional Feds even said so  today, while everybody was so focussed on the puppet show in the House.   

Mercury's picture

Misguided Keynesians they may be but if they are serious, rigorous Keynesians that’s what they should do...although I think they already know what the results will be.... which will make (in their eyes) waiting around to make observations seem not worth the dely in policy action.

 I guess we’ll have to see how fast things get bad and how much external influences tip the scales in their economic laboratory…

Not For Reuse's picture

who the fuck owns gold but not treasuries? u fuckin retarded? people who don't think things out deserve to lose hella money asap

glenlloyd's picture

Weimerian highs....that's epic

YesWeKahn's picture

Zibabwe high isn't that recent.

YesWeKahn's picture

I can only think of that China will get less interest payment, is that a good thing?

Archimedes's picture

So tired of the same old song and dance. How can a country with 14.3 Trillion in debt and a sinking economy be a safe haven? How can an economy with a 1.3% GDP growth rate after the Govt deficit spent and additional 400 billion in the Qtr have a stock market down by only 70pts!


SheepDog-One's picture

Well thats why Im sitting it out on gold and silver. Hell with this clownshow. 

And if everyone did that, just stopped playing and cashed out their paper, the Ponzi would implode in on itself quickly.

youngman's picture

I think peole are..key word is people.....they are pulling money out of MM accounts big time...I think the volume we see is just day traders and HFT computers..

EscapeKey's picture

"Disturbing" Rumblings Of Panic Begin As Investors Pull Almost $40 Billion From Money Market Funds

This article states that treasury-investing MMF's had significant outflows - ie, lots of treasuries being sold, presumably. And yet, they keep crawling ever upwards.

Tell me the logic behind this, if this indeed is a "free market".

Iam_Silverman's picture

"This article states that treasury-investing MMF's had significant outflows - ie, lots of treasuries being sold, presumably."

I am financially illtiterate, but, doesn't the term "outflow" as it is used here mean that investors are pulling their money out of the targeted money market fund?  If so, then I can see how this would cause a massive selling of the funds assets (in this case, Treasuries) in order to provide those investors with their "lovely departing gifts".

Maybe the run on short-term Treasuries that mature in the next three months is due to the implied guarantee (full faith and credit of the U.S.) coming into question in the near future?  In other words, get your money while there is time?

EscapeKey's picture

Exactly. Lots of treasury sales, which should cause their price to go down (yields up). But the reverse is happening.

ViewfromUndertheBridge's picture

Isn't the demand for USTs due to variation in Repo discounts?

disabledvet's picture

what you're not asking it "what are the MM's buying"? They are the ultimate yield hungry "investors" as we all now know from Lehman's collapse. A collapse in the debt market will be preceded by soaring treasury prices since "the perception of safety" is in fact the reality. thrown in a DC hissy-fit and you have the recipe for a total "disturbing" of a market that is twice the size of the equity market "on a normal day" and in an age of QE probably more like 10 times the size. these Money Market folks have no idea what to do with money--more than likely they've been buying euro-debt up the ass. now the "bill is coming due" and the euro itself is destroying the European debt markets and more importantly trade itself is seizing up thus putting the ironically responsible European Union in "total and instant economic hell." this has already been manifested with unpayable debts in Ireland, Greece and Portugal. Now the economies are in full free fall which is leading to an immediate and forced return to "europe before the euro." all that debt is worthless. it is spreading to the USA...although Japan has been a fascinating exception--so insofar as the USA is concnerned what for "Sudden Default" of a state or large municipality--probably the failue of a major bank like BofA. nothing that the Fed can do about but follow Gresham's law of "don't throw good money after bad" and hope it works out.

oldman's picture


Your question is a good one.

"So tired of the same old song and dance. How can a country with 14.3 Trillion in debt and a sinking economy be a safe haven?"

Because these non-bankers bankers, believe it or not, are stupid as is 'big money'. These guys are not bright at all. That's why after three years of study the brightest minds in US academia came up with Glass-Steagall in the '30's: they discovered that american bankers are socio-paths and that the only way to protect the citizenry is to outlaw them from the markets and have very strict controls over each transaction at all times.

This is not a joke, my friend         sadly enough the goldust twins came along and bought the country     om

GtownSLV's picture

Kind of like a tsunami, the tide receeds and all the dumbshits wander out into he seabed to take a look, then oh shit, a big wave wipes them out.

Also, don't expect Obama to do anything next week but play big in the crisis and let things get worse as they are terrible things to waste.

EscapeKey's picture

USD/Yen @ 76.94.

Flight to dogshit quality. Who the hell buys these treasuries, when the Dollar meanwhile is collapsing?

SheepDog-One's picture

Ultimate safety is in dollar denominated debt? Makes no sense to me at all. And this rush to bonds because last time a year ago it was a good idea is likely to faceplant this time.

Bonesetter Brown's picture

Indeed.  Exeter's pyramid and Irving Fisher's bifurcated credits. Very predictable.

ivana's picture

That's a really good question ... it is hard to know for sure but violent swings in US bonds since end of 2010 looks to me like start of wave 3 upwards. Knowing what banksters did to all other markets and free trade - could be some form of manipulation which they are practsing while they can.

Expect USD to start rising when bonds resume wave 3 of 3 - very soon I guess. That will come as some compensation to poor VIP bond customers, dictators, oil sheikhs etc.

mind_imminst's picture

This is the weirdest thing going on right now. Bond yields not only going down but the face of macro economic news, political news, and basically all common sense that SCREAMS higher yields. I can't help but think that either the FED and TBTF banks are secretly manipulating the bond market to prevent the U.S. from suffering the same fate as the PIIGS (and to rip the face off the bond vigilantes and everyone going short, including PIMCO), OR the HFT algos are not programmed to trade on a potential U.S. default. They are blindly buying U.S. bonds (secondary markets, for safety) because a U.S. default has was never considered during their programing. Just grasping at straws trying to figure out why bond yields are not rising. It is the strangest thing.

ivana's picture

Violent swings are visible so there must be some massive unloading followed by sharp yields surpression, short sqeezing etc. Yields surpression was used last months for new debt issuance.

Considering global size of bond market , I do not expect powerz can easily or quickly start full manipulation with algos like it has been done with stocks, PMs and parts of commodity markets.

Bond holders troughout the world will be waking up at different "speed" ... Gross and Rogers can be considered as "smart money" IMHO here even if many ZH readers will joke with them for few days.

Question: will powerz force cash funds, TBTF banks and other pools to enter falling bond market?

According to timeline of announced events , next UST10y stop may be at 2,66% and probably reversal into wave 3 of 3 higher

Cursive's picture


The only thing saving the FRB and the banksters is the low rates. If they lose the curve, all is lost. This makes a surge in yields anytime soon very questionable.

LawsofPhysics's picture

Who is buying these treasuries?  Simple, anyone who does not have access to insider information or enough capital to trade and invest in privileged arenas.  Basically, anyone with a 401K, 529, or locked into the ponzi via their institutional investor.  God only knows where gold would be if I and all my employees could actually make 100% of our own investments.  This is financial repression to maintain the status quo.  Settle in everyone, this winter will last 50 years.

Sophist Economicus's picture

The fact that 'the bond market' is as huge as it is, speaks volumes on the mess we are in, and the diversion of capital that does nothing else but 'gamble' on the direction of government debt on a day-by-day basis. I'm do ready for the implosion to happen already

BaBaBouy's picture

GOLD *** HUGE COMEX Commercial (i.e. Big Banks) Paper Gold SHORTFEST ...


Net 19,000+  new contracts short this week.


3rd week in a row of large new shorting by them. Why? Is this the way to make profits?


Anyone ask themselves where GOLD would be right now if these Fecks didn't Short the Hell out of the Paper Gold Market ???


Anyone spell Manip ???

EscapeKey's picture

Oh, the commercials went short for a change, did they?

Oh, don't worry your pretty little head about that. They were just "market making". Market making in PMs means to sell short.

edit: Net short for the week is about 10k. (-18) and (-8).

BaBaBouy's picture

Check Your INFO ...

COMMI Net shorts added as of Tuesday which is the only official  data CFTC gives us is:

LONG: -4,135 SHORT: +15,024


Net Commis is over 19K like I said.


You Say: ""Oh, the commercials went short for a change, did they?""

==========> I've been tracking these and other stats for long years.

As long as I can remember, The Commi's have always been heavily SHORT, never have I seen them net long, never.

In a normal market, you would expect to see them go actually long once in a while to play the other side for profits.


EscapeKey's picture

I think your sarcasm detector is broken.

Your link is futures only, mine is futures+options, so fair enough.

BaBaBouy's picture

Yes, my sarcasm detector is in the repair shop...

slaughterer's picture

We laid on Spec shorts this week as well.

BaBaBouy's picture

Spec shorts fine, thats your gamble.


Commi's are perpetually short.

Currently near recorod 28 Million ozs paper Gold, and counting...

Mike2756's picture

How much will it be this time? Oh, and when does instability come into play?

Sophist Economicus's picture

Wow! Living mortgage free for years, probably also took out a $30k Home equity loan and that's the crappy furniture she ended up with?

Whew. You'd think she'd watch a couple of episode of this old house while home on 'disability'

SwingForce's picture

"Screaming bloody QE!" awesome. 

But if QE2 did not help the economy (look at last 6 mos. revisions in GDP today), and the Fed does not target the 70% of economy, "Consumers", how can another massive asset purchase program instill confidence in a Congress who is tackling (finally) the issue of massive over-spending?  

(H/T Dylan Ratigan, "Run-on Sentences For Dummies").

AustriAnnie's picture

Congress is NOT tackling the issue of massive over-spending.  Its a dog and pony show, remember.  Don't watch too long or you might go into that sheeple-trance and start to believe it yourself.

LawsofPhysics's picture

Exactly, the ponzi puppets are arguing over money that both parties already spent.  Sort of like refusing to pay your credit card when the bill finally arrives.  Wait what? People are already doing that AND not paying their mortgage?  Nevermind...

SheepDog-One's picture

Everyone Pavlov conditioned to believe next up is another sure delivery of unlimited Hefty bags of free crack to the markets, I wouldnt be so sure, and whatever happens is guaranteed to disappoint. Thats what I see anyway. They might get a QE, but it will be just for maintenance, no $10 billion daily POMO partys, those days are over.

Cromwell's picture

CFTC is out. it's on First Word Fixed.

Tyler Durden's picture

It's as of Tuesday, hence, irrelevant.

BaBaBouy's picture

Probably added another 10K contracts since then.


Butt of course, due to the Comex's ARCHAIC Reporting System only they "know"...

Boston's picture

Missing this move hurts....kind of.  After grabbing 7 full points since Feb. on a blend of Notes (5-10 year), I went flat recently.

But I don't have any regrets: no need to get greedy, and the technicals were very murky (there was no way to argue a strong upward move in prices earlier this week).  And if the debt ceiling vote had passed the house, for example, longs would have been smoked.

Now it's time to prepare an equities buy list......shares I'd like to own at 30% off.  Wait for the pukefest and then load up.

After QE3 gets announced, it will be time to short Treasuries....again.

Hearst's picture

I remember all the talking heads congratulating themselves on how Bernake would be tightening monetary policy and start to reign in the stimulus as green shoots were surely signaling that the recovery was well under way.  QE3 here we come!

AustriAnnie's picture

"Green Shoots" are to "Bernanke"


"WMD's" are to "Bush"

They must be here somewhere......we just haven't looked hard enough.....keep looking......