ICE BofA MOVE Index courtesy of Trading View

Trader Comments 

• “A trade that should take seconds took minutes,” said Jon Jonsson, a fixed-income portfolio manager at Neuberger Berman.
• “You can’t have a conversation with Treasury traders without them going on a rant about Treasury liquidity,” said Hani Redha, a multiasset portfolio manager at PineBridge Investments. “That just means that moves get amplified. You’re going to get overshoots in both directions.”
• Trend followers scooped up roughly $128 billion of eurodollar futures, contracts tied to the expected level of benchmark interest rates, in the past week to close out their so-called short trades, according to Nomura estimates.
• The swift reversal in expectations for Fed rate increases and bond yields led quant funds to their worst two-day stretch on record since at least 2000, falling 7.7%, according to Nomura.
• JPMorgan Chase & Co. analysts recently said that liquidity in the Treasury market has fallen to the lowest levels since March 2020, during the pandemic market crash. “Treasury market functioning is severely impaired, similar to what unfolded this time three years ago,” the firm’s analysts wrote in a note to clients.

The above comments are from the WSJ article Market Stress Snarls Trading in U.S. Treasurys

Wild Action

Unprecedented Swings 

We have seen wild action in US treasuries in the past week. Traders plowed into leveraged bond shorts expecting more hikes.

Then suddenly we have gone from a 50 basis point hike to none at all for the March 22 FOMC. 

Never before have we seen such an amazing swing this close to an FOMC announcement.

Bank Bailouts and Contagion

The swings are related to a huge bank bailout as discussed on Match 13 in Yellen Said "No Bailout" But It's a Huge Bailout of the Banking System

Today, I reported Bank Contagion Spreads to Europe, Credit Suisse Sinks to a New Record Low

The Fed finally convinced everyone that it meant higher for longer, then a few days later people are discussing rate cuts. What a hoot.

Expect some hedge funds to blow up over this bond market volatility.

I will post some Treasury charts after the close and data is available from the New York Fed. 

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