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Ugly Close As 30Y TSY Yield Drops Most Since March 2009

Tyler Durden's picture




 

While much was made of the MF Global news today, we suspect that the tipping point for risk assets was more likely driven by the plethora of reality-based analysis of the situation in Europe combined with the afternoon news that Greece is facing a referendum and a lack of demand for the EFSF issue today. Heavy volume arrived into the close to the downside, suggesting asset allocation rotation from equities to bonds, which helped propel TSYs even further down in yield. The entire complex flattened notably with 30Y outperforming -24.5bps, the largest single-day yield move since March 2009, as the much-watched 2s10s30s butterfly has retraced all of last week's increase. ES closed at its lows (down over 2.5%) only to extend those losses in the evening session as we post.

At over 4 standard deviations, today's drop in 30Y yields was the highest for a single-day since 3/18/09.The roundtrip in the entire TSY complex from last Wednesday is quite impressive and remains surprising as to how a broad market can interpret what was so clearly no-real-news in such a schizophrenic way without some 'help'.

35bps sell-off in 30Y at its best early Friday - only to give it all back and some by the close of today - perhaps there is something to our perspective on MF Global and its TSY inventory last week. The drop in TSY yields was initially shrugged off by ES but very quickly it became clear that fears were gathering and ES accelerated to the downside - with IG and HY credit tracking wider also. VWAP acted as natural resistance at every small rally suggesting there was more of an institutional bias to selling today - which again fits with the rotation we would expect after such an aggressive month's performance in stocks.

As the day wore on, all risk-drivers were reverting back to what is more realistic (as opposed to the intervention-dislocation from the overnight session). EURJPY has retraced almost the entire move and as we closed CONTEXT and ES were back in line - rather surprisingly given the amount of movement (and lack of recalibration) in asset classes today - though we did note earlier that risk-off in broad markets was dominating any correlation-drivers.

Under the surface, HY and HYG underperformed stocks (having not really seen the kind of risk-on moves to bring them back to fair even with last week's ebullience) but IG was the worst relative-performer (as we suspect low-cost hedges /shorts were laid back out). Financials in the US were not pretty  (even though Materials and Energy underperformed broadly) as CDS widened and stocks tumbled in the majors (e.g. MS -9% and 35bps wider!!). We have to say it was rather quiet and slow to start with - which makes sense given last week's violence - but by the close equities and credit were losing ground fast once again.

EURUSD lost 1.39 and DXY managed a 2% gain from Friday's close (as JPY's 3% loss contributed). PMs slid lower as the dollar rallied and aside from what appeared to be a liquidation (and unique to itself) rip-fest in WTI in the middle of the day, moves in commodities were all negative.

Volumes were in general light until the last hour or so. Whether this was MF related as traders were anxiously re-arranging clearing or a month-end wait to transact is unclear. It is clear, however, that firms are clearly derisking (as IG reaches back to fair-value and HY cheap once again and the European financials and sovereigns face renewed pressures).

 

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Mon, 10/31/2011 - 17:36 | 1829829 malikai
malikai's picture

They're rolling that shit out like it's caviar!

Mon, 10/31/2011 - 17:41 | 1829837 spiral_eyes
spiral_eyes's picture

yawn

the end of the Keynesian shitheap begins with a treasury slump, continues with a treasury crash, and ends with a default cascade, huge printing, and the death of the dollar.

http://azizonomics.com/2011/10/31/the-abolition-of-deflation/

Mon, 10/31/2011 - 17:49 | 1829849 Zero Govt
Zero Govt's picture

not Keynes that is failing, nothing whatever to do with this guy

it's the monopoly institution Govt that's failing (again and again and again)... the dumbest fuk idea society ever got suckered into 

Mon, 10/31/2011 - 17:53 | 1829858 dexter_morgan
dexter_morgan's picture

well, not to be picky, but isn't big gov kind of dependent on Keynsian stimulus voodoo economics? Both a major fail!

Mon, 10/31/2011 - 23:13 | 1830708 jeff montanye
jeff montanye's picture

actually big government is dependent on war.  look it up.

keynes offers the mendacious an excuse for lack of prudence, as in "we're all keynesians now".  although he was given to hyperbole: "bury jars of money and pay people to dig them up" or something, the general theory of employment, interest and money in important ways is what wise princes in the bronze age knew: save in times of plenty to be able to spend from stores in times of famine.  

these fools spent from stores in times of plenty.

Mon, 10/31/2011 - 17:36 | 1829831 PaperBear
PaperBear's picture

Does this mean the sellers of paper gold/silver will be out in force again tomorrow ?

Mon, 10/31/2011 - 17:38 | 1829833 bugs_
bugs_'s picture

30Y signalling a clear message - just like Dr. Copper.

Mon, 10/31/2011 - 17:46 | 1829842 DoChenRollingBearing
DoChenRollingBearing's picture

+ 1

Yes, it is.  

This is a lousy time to be an investor.  Cannot get any yield anywhere (and that is hurting people, myself included, see Bruce Krasting's article above).  Stocks are manipulated and likely to be a trap...  Like apparently Bruce K. has done, Mr. and Mrs. Bearing have cut spending across the board.

And there is more inflation here than .gov lets on.  Liars!  What else is new?

Cash (FRN$) and gold.  Cash and gold.  Along with Pb to defend it.

Mon, 10/31/2011 - 18:10 | 1829885 trav7777
trav7777's picture

Tough to get yield?  What did you honestly expect when the economy stopped growing?

Yield isn't free...it comes from growth.

The real problem now for equity investors is the high implied correlation imposed by all the indexmonkey ETFs.  There are alpha plays out there but they get swamped by index moves.

Mon, 10/31/2011 - 18:29 | 1829922 Stax Edwards
Stax Edwards's picture

+1 Very true.  Although I might argue it inversely has the effect of creating value via high correlations as well.  Does the truth come out of the wash in time?

I have gone long patience...Scary how broke it sometimes feels in real time though.  These are the new markets.

Mon, 10/31/2011 - 20:22 | 1830206 Flakmeister
Flakmeister's picture

Cash flows on hydrocarbon assets.... Oil, NG, Coal....

I don't do coal on principle... but the others are dandy...

Mon, 10/31/2011 - 17:39 | 1829836 monopoly
monopoly's picture

At some point, and I have no idea when, as the market moves lower for a day or two it will continue down in a heart pounding manner and eventually touch reality. How low is that? We will find out.

Mon, 10/31/2011 - 17:41 | 1829838 Irish66
Irish66's picture

Who is the UK broker dealer that is in trouble?

Mon, 10/31/2011 - 18:16 | 1829894 common_sense
common_sense's picture

so many? 

Mon, 10/31/2011 - 18:18 | 1829902 Sudden Debt
Sudden Debt's picture

Heard the same rumor over here, but it seems to be a scottish broker firm that's in trouble. I wrote it down on a post it at the office... I wonder where i placed it....

Mon, 10/31/2011 - 17:44 | 1829840 RobotTrader
RobotTrader's picture

Yep, everyone panics into "Paper" at the first sign of any credit problem.

U.S. Dollar, T-Bonds, Munis, money markets, whatever.

Anything but stocks and hard assets or "resource plays".

Amazing how fast they stampeded back into Fiatscos today.

Another 2 days like today, we'll be under 2% on the 10-year again and Tom Keene will be apoplectic again saying "The 10-year is now the 2-year", etc.

If Bernanke doesn't print another trillion ASAP with these absurd low rates, he should be tried for incompetence and dereliction of duty.

Mon, 10/31/2011 - 17:49 | 1829850 DoChenRollingBearing
DoChenRollingBearing's picture

+ 1

You called it, credit given where credit is due.  But, I don't trrade, I move slowly...

---

Bernanke should be tried anyway, along with Corzine.  A two-fer!

Mon, 10/31/2011 - 17:51 | 1829855 dexter_morgan
dexter_morgan's picture

Yawn....still waiting for your $20 silver prediction to come true so I can stock up. What has it been 3 or 6 months since you were ejaculating that on here?

Mon, 10/31/2011 - 17:53 | 1829859 camaro68ss
camaro68ss's picture

Your fucking nuts for wanting the bernake to print another trillion but im sure your right in him doing so

 

 

Mon, 10/31/2011 - 18:12 | 1829888 trav7777
trav7777's picture

Nah, he's right.  If the idiot market will letcha, might as well make the hay.

BB will have no choice anyway...interest is eating the money supply and growth and production can't pay the coupon.  To keep it fluffed, like Japan, you have no choice but to inject periodically.

Mon, 10/31/2011 - 19:41 | 1830107 DosZap
DosZap's picture

camaro68ss

 but im sure your right in him doing so

You better believe he will, and it will be the largest yet.

Mon, 10/31/2011 - 18:40 | 1829949 SwingForce
SwingForce's picture

https://docs.google.com/spreadsheet/ccc?key=0An-C4NLkRQu7dDBFZGZEdTViOENrcnU5Ukd0YzZ1VlE&hl=en_US#gid=0

 

Sortable by Column Header ($VOL, % YLD, etc).  Its true, if these fucking idiots want yield, they are running in the wrong direction.  PS- 1 mo' time http://www.youtube.com/watch?feature=player_embedded&v=UI2FolId6CA

Mon, 10/31/2011 - 17:52 | 1829857 kito
kito's picture

Yep, everyone panics into "Paper" at the first sign of any credit problem.

U.S. Dollar, T-Bonds, Munis, money markets, whatever.

 

 

wow robo, thanks for the news, youre hindsight is awe inspiring.......

Mon, 10/31/2011 - 19:35 | 1830094 DosZap
DosZap's picture

Yep, everyone panics into "Paper" at the first sign of any credit problem.

U.S. Dollar, T-Bonds, Munis, money markets, whatever.

 

because they are CLUELESS, as this is what they are ALL depending on to save their asses.

Instead, it will be their WATERLOO,sooner or later.

Mon, 10/31/2011 - 17:58 | 1829860 mynhair
mynhair's picture

Not counting on a continuation Tues.  This pig is fracked.  FOMC meeting.

More Hopium!

Mon, 10/31/2011 - 17:59 | 1829867 RobotTrader
RobotTrader's picture

With zero rates on the short end, I guess Bernanke would rather take his chances and keep rolling over the shorter term debt at zero cost.

Can't blame him.

The appetite for U.S. Confetti is at all time highs and shows no signs of stopping.

Wouldn't surprise me to see the market tank some more to give Bernanke an excuse to "shock" the bears again with some "words"

Mon, 10/31/2011 - 18:41 | 1829950 maxmad
maxmad's picture

Or it could just be that stocks are over-valued...

Mon, 10/31/2011 - 18:44 | 1829952 SwingForce
SwingForce's picture

Roll them over, do them again!  (Personal Motto)

http://www.youtube.com/watch?feature=player_embedded&v=UI2FolId6CA

Mon, 10/31/2011 - 20:04 | 1830164 DeadFred
DeadFred's picture

What's the chance that a bunch of these bonds went to Japan? Reports are the sold off 10 trillion yen last night before the peg broke. $125 billion buys a fair number of treasuries.

Tue, 11/01/2011 - 06:15 | 1831051 MFL8240
MFL8240's picture

Quite the contrary.  The appetite for US confetti was in the sewer till Japan was summoned by this corrupt cartel running America to debase its currency to prop the dollar up.  That is not an appetite that is desperation. And no, the Japenesse are not stupid enough to buy US debt, they have enough of their own debt to monetize.

Mon, 10/31/2011 - 18:07 | 1829880 duncecap rack
duncecap rack's picture

Sorry OT but does anyone know why mbia took off like a rocket at close? I can't find any news.

Mon, 10/31/2011 - 18:14 | 1829893 mynhair
mynhair's picture

Short squeeze?

Mon, 10/31/2011 - 18:14 | 1829892 common_sense
common_sense's picture

bearish trap.... mclellan chart even gone up....

Mon, 10/31/2011 - 18:17 | 1829899 bogey4
bogey4's picture

Wells Fargo agreed to withdraw from lawsuits against MBIA...

Mon, 10/31/2011 - 18:44 | 1829953 Caviar Emptor
Caviar Emptor's picture

Yup. Been sayin it since last week: things are different now. Since March 09 the understanding was that Bernank (and Trichet) had your back if you put money at risk. And that stimulus would emanate from QE and the fiscal side (Obama and Merkozy) forever to give the false cover of fake 'growth'. 

Now that's all over since Greece's haircuts (which portend more) and MF Global's bankruptcy (violating the TBTF principle). 

When the market said "risk on" before this week, it was only a joke. Risk was taken out of the equation. That's what attracted money back in after the 08 bloodbath. But now that risk is real and back in a world full of unpredictables, it changes the tone. 

Mon, 10/31/2011 - 19:01 | 1830016 eddiebe
eddiebe's picture

Flip Flop Flip Flop, and each time a bit of cream is siphoned off by the robots for the bankstas. Good luck flipping and surviving this. Maybe buy and hold is back? Long toilet paper, paper towells and low interest fixed gov. loans. 

Mon, 10/31/2011 - 19:06 | 1830018 virgilcaine
virgilcaine's picture

Its only a matter of time before stocks follow to those levels also. You have to view stocks as a lagging indicator now,  Credit and Base and Precious metals as lei.

Mon, 10/31/2011 - 19:16 | 1830054 razorthin
razorthin's picture

Sadly, any benchmarks at vectors that compare to March 2009 are bullish.

Mon, 10/31/2011 - 19:19 | 1830060 msmith
msmith's picture

The EURUSD and the AUDUSD are displaying USD bottoms rather well.  This could very much likely be a significant turn in the markets.  http://bit.ly/ucGTXm

Mon, 10/31/2011 - 19:19 | 1830061 virgilcaine
virgilcaine's picture

Wait until a few more Banks and primary dealers go bye bye..credit will disappear faster than cash at solyndra.

Mon, 10/31/2011 - 19:46 | 1830117 NotApplicable
NotApplicable's picture

ZIRP4EVA!

Remember, zero is the only space where infinity can exist. Infinite debt, in this case.

Mon, 10/31/2011 - 19:53 | 1830129 azzhatter
azzhatter's picture

Ron Paul 2012

Mon, 10/31/2011 - 23:22 | 1830733 jeff montanye
jeff montanye's picture

paul/johnson '12

Mon, 10/31/2011 - 22:18 | 1830563 mszh
mszh's picture

Tyler can you post 2s10s30s butterfly

Tue, 11/01/2011 - 06:10 | 1831050 MFL8240
MFL8240's picture

So, I guess this all must make sense to someone, but not me.  The economy is in dire straights, the world will no longer buy our bonds, the Federal Reserve prints money out of thin air to buy 80% of the debt, the same debt bought with wortless money, issued by an insolvent goverment is where to go for protection during times of turmoil?  I guess I'm just lost because this makes no sense to me!

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