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The Treasury Market Is Broken. ETFs Are Cracking. Risk Parity’s ‘Footprints’ Have Been Spotted.

At worst, it’s madness. 

"USTs are a 'broken market'", Nomura's Charlie McElligott writes, in a Thursday note recapping some of the action briefly discussed here on Wednesday evening. Last summer, market participants marveled at the rapidity and scope of the collapse in yields. Turns out, folks hadn't seen anything yet. "20bps+ swings [are] now becoming standard, particularly within the off-the-run space which are trading miles wide due to balance sheet dynamics, with no more dealer capacity and RV guys unwinding into clear stop-out trades", Charlie goes on to say. He then delivers some color that underscores Wednesday's RV "blowups" chatter (more here). "The RV funds which have rode the past 10 years of QE, quiet funding, and accommodative Fed policy are the central point of pain in the UST market", Charlie says, quoting a colleague in fixed income, who went on to essentially say that recent basis moves suggest large losses for levered trades. Bloomberg's Cameron Crise - who spent virtually all of Wednesday furiously documenting the same thing - weighed in again on Thursday, noting that while everyone is understandably fixated on equities, there's "carnage" in fixed income. "Relative value -- hist
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4 comments on “The Treasury Market Is Broken. ETFs Are Cracking. Risk Parity’s ‘Footprints’ Have Been Spotted.

  1. Tom says:

    Yes, there are cracks in economies around the world. This is a moment for real leadership.

    Instead, what we have here in the US is a clown show. We have an inept president who has repeatedly tried to bluff markets with false bravado and empty promises. And he is surrounded by bootlicking lickspittles who humor the emperor without clothes and refuse to act with urgency and defer to actual expertise.

    And thus we have arrived at a tipping point. The Abyss is gazing into Trump.

    What could go wrong?

    • Anonymous says:

      Trump is trying to bullshit his way out of crisis.
      He always did this, and it always works, so he simply can’t imaging how it can’t be working.

  2. calh0025 says:

    The response to this has got to be truly unimaginable. I mean stop the oil price crisis by buying all the excess supply up until prices bounce, park it in abandoned mall parking lots. Buy up all the overexposed HY. Pay for all the sick leave and healthcare costs for the virus. Startup QE Turbo Mode, drop interest rates and probably implement the freedom dividend… That might get things patched up before the election.

  3. payshunt says:

    What happens if they close markets for a couple weeks? Who would be in the most pain?

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