Bond Vigilantes Are Going For the Record

ZeroHedge has been warning of a bond squeeze with the 10-year heavily shorted, but something that also happens in oversold conditions is plunging prices and crashes. Unlike a stock such as GameStop, executing a squeeze in the bond market is near impossible. Instead of it being like a squeeze, it's more like too many people on one side of the boat. Eventually it will tip back, but in the immediate present, people who are holding out on the other side go tumbling down. There's also a liquidity crunch in the market. ZH: 10Y Treasury Hits A Stunning -4.25% In Repo As Yields Blow Out

Last night we first pointed out something shocking: as a result of a massive wave of shorting in Treasurys in the past three days, the 10Y hit a record -4% in repo, an extremely rare event and one which occurs only when there is a dramatic shortage of collateral as a result of overshorting (think of it as very hard to borrow condition for stocks). What was even more amazing is that the repo rate was below the fails charge, which at least in theory is the absolute minimum that a 10Y rate can hit in repo. Effectively, it meant that an investor in the repo market lending money so others could short the 10Y ends up paying rather than getting paid. Needless to say, this is a clear breach of one of the most fundamental relationships in the repo market, where lenders of cash always get paid - however little - in order to make a more liquid and efficient market.

Payrolls surprised on the upside at 379,000, the market was looking for closer to 200,000. The 10-year yield spiked above 1.60 percent. We'll soon find out if this is the end of the move or the acceleration into a selling climax. There's is some resistance for the 10-year here, but if it runs, I think we could be looking at 2.00 percent later today or early next week.

Here is video of the 10-year Treasury bond market, you can see all the people holding on to 10-year Treasuries praying for Jerome Powell to say something positive for bonds. At about 46 seconds in, this Drudge headline flashes: