This Is What A Broken Bond Market Looks Like: Treasury “Failures” Soars To Multi-Year Highs
by Tyler Durden
ZeroHedge.com
03/11/2016
Earlier this week, when looking at the rapidly fraying dynamics in the all-important Treasury repo market, we explained that as a result of the unprecedented, record shortage of underlying paper, the repo rate for the 10Y has plunged to the lowest on record (and even surpassing it on occasion), the -3.00% “fails” rate, an unstable, broken state characterized by a surge in failures to deliver and receive, when one party fails to deliver a U.S. Treasury to another party by the date previously agreed by the parties. Think of it as a margin call issued on a stock in which the responsible party refuses to comply, and is instead slapped with a token penalty, or “fails” fee.
This is precisely what has been going on with the Treasury market for over a week, ever since last Friday when we first pointed out the precarious collapse in the repo rate on the 10Y – traditionally the best indicator of stress in lending markets.
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