Over the past week we have been following a disturbing development in the US Treasury market: while the repo rate on the 10Y has been sliding deep into negative territory for a while, on Friday it finally hit the "fails charge" of -3.00%, suggesting there is a massive shortage of Treasury paper as a result of wholesale shorting by various market participants.
Something is broken in the US bond market.
One day after the NY Fed unexpectedly announced yesterday's Agency MBS POMO was cancelled (then rescheduled to later in the day) due to "technical difficulties", moments ago the US Treasury announced that with 10 minutes to go before today's 7 Year auction, that the auction is being rescheduled for tomorrow due to, drumroll, "technical issues."
This is the full statement it said:
NEW CLOSING DATE AND TIMES FOR TODAY'S 7-YEAR NOTE AUCTION
Long before the mainstream media caught on to the topic of SWF selling of stocks, we warned a month ago that as a result of the collapse in oil, and assuming oil remains priced at roughly $31 per barrel, the world's largest SWFs showin the chart below...
... would be forced liquidate at least $75 billion in equities and the lower the price of oil goes, the more selling there would be.
Almost one year ago, in March 2015, we explained how "The Fed's Artificial Steepening Of The Yield Curve" has resulted in many unexpected consequences, the most important of which has been the erroneous interpretation of the yield curve as a leading recessionary signal. As said back then, "the artificially steep yield curve is a reflection of policy intent not economic reality....
It's not just stocks have a terrible start to the year, in fact the worst start in history: so is the amount of US Treasuries held in custody at the Fed, a direct proxy for the holdings of foreign central banks, reserve managers and sovereign wealth funds who park owned TSYs at the NY Fed for convenience.