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

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