Well, if you were waiting on that Treasury short squeeze that Jeff Gundlach suggested was coming back in August, it’s at least possible it could materialize in the face of mounting risk-off sentiment in global equities.
10Y U.S. yields are lower by 7bps on the day, the biggest rally since late May.
There’s more than a little irony in that. After all, it was a meltdown in BTPs that catalyzed the May rally and here we are on Tuesday staring down a situation where the European Commission has just rejected Italy’s budget.
Here’s the 10Y short which is obviously still crowded:
If you’re wondering when that might get squeezed, Nomura’s Charlie McElligott provided the following possibly helpful visual on Tuesday morning, which he says depicts the point at which the TY short “gets squirrely”: