Are Treasury Shorts About To Scream: Total Collapse In Supply As 10s, 30s Plunge In Repo, “Fails” Galore
by Tyler Durden
ZeroHedge.com
03/08/2016
Over the past week we have been following a disturbing development in the US Treasury market: with the repo rate on the 10Y has been plunging deep in negative territory, on Friday it finally hit the “fails charge” of -3.00%, suggesting there is a massive shortage of Treasury paper as a result of wholesale shorting by various market participants.
Back then we explained the move as follows: “[as of this moment] the repo rate can’t go any lower, and any demands to cover Treasury shorts are met with “Delivery Failure” notices. For those who are unfamiliar, a “Delivery Failure”occurs when one party fails to deliver a U.S. Treasury security, Agency Debt or Agency MBS to another party by the date previously agreed by the parties (Sifma has more). It also means that there is an unprecedented (and based on the historical data, record) amount of shorts who would rather pay the fails charge than to cover their positions on the delivery demand, or alternatively, there is simply not enough Treasurys in the private market that are not locked up in short positions. Finally, this means that the panicked scramble by various entities, including central banks, to short US Treasurys continues unabated.”
The Rest…HERE
