End of Year Carnage

December 31st, 2013 1:42 pm | by John Jansen |

The Treasury market is finishing the year with a resounding thud as the 10 year note and the 30 year bond are each closing at multi year high yields. The 10 year note is around 3.015 and the Long Bond is around 3.95. The 10 year is now cheaper than the cheapest close in September (according to Bloomberg)  and the Long Bond at 3.95 is at levels last observed in the summer of 2010. It appears to my untrained technical eye that the next stop for the bond is around 4.07. Participants held the Long end up to derision today as the curve steepened in this sell off. The 5s 30s spread was 219 ish earlier today and as I write this it is 221 ish. The 5s 10s 30 butterfly traded counter intuitively as the 10 year is now a tad richer versus the wings at 33.2. The middle piece of that fly generally cheapens in sell off so the behavior is unusual.

Early in the day of did hear of some duration buyers in the belly as well as some selling of some one year spread product which had fallen out of a money manager’s maturity bucket. later in the day there has been real money buying in 10s and central bank selling in 7s. Real money was selling in the Long End and buying in the front end. Prop traders paid 10 year rates and bank portfolios received 10 year rates.


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