A 2023 US T-note squeeze? | FT Alphaville

A 2023 US T-note squeeze?

A hat tip to John Kemp at Reuters for drawing our attention to this from the US Treasury on Friday:

WASHINGTON – The Treasury is calling for Large Position Reports from those entities whose reportable positions in the 0-3/4% Treasury Notes of September 2013 equaled or exceeded $2 billion as of close of business Wednesday, December 8, 2010. This call for Large Position Reports is a test. Entities with reportable positions in this note equal to or exceeding the $2 billion threshold must report these positions to the Federal Reserve Bank of New York.

Entities with positions in this note below $2 billion are not required to file Large Position Reports. Reports must be received by the Government Securities Dealer Statistics Unit of the Federal Reserve Bank of New York before noon Eastern Time on Wednesday, December 15, 2010, and must include the required position and administrative information. Large Position Reports may be faxed to (212) 720-5030 or delivered to the Bank at 33 Liberty Street, 4th floor.

The note in question has a CUSIP of 912828 NY 2.

Here’s the chart from Reuters:

And here’s the 10-year benchmark to compare:

Though we can’t be sure that’s a fair comparison, since there are always on-the-run off-the-run premia to consider.

Nevertheless there does seem to be more of a difference than there perhaps should be.

The following is also worth noting from a Bloomberg story earlier in March:

Benchmark 10-year notes today were the highest in demand, or on “special,” in the repurchase-agreement, or repo, market, where firms borrow and lend securities. The securities’ repo rate closed at negative 2.95 percent, with traders willing to pay to borrow the securities in exchange for loaning cash.

“Before the reopenings, you tend to see the 10-year trade pretty special in repo markets,” said Aaron Kohli, an interest- rate strategist in New York at the primary dealer BNP Paribas SA. “What happens is that people are buying up a lot of the 10- year, and then those who want to short it or sell it are having difficulty borrowing it.”

Ten-year U.S. debt has lost 1.9 percent this year, according to Bank of America Merrill Lynch indexes, almost double the 1 percent loss in the broader Treasury market. The notes returned 4.2 percent in 2012, compared with a 2.2 percent gain by Treasuries overall. The government will sell $13 billion of 30-year bonds tomorrow. It auctioned $32 billion of three-year notes yesterday at a yield of 0.411 percent.