The Treasury supply surge was trimmed this month, as the Treasury spent cash to pay down T-bills and double up buybacks. It did not help. Treasury prices cratered and yields surged. Significant chart levels have broken, and another breakout, through 5% on the 10 year appears imminent. The implied measured move target of that would be x.xx%.
Repo issuance remains weak and leveraged funds are reducing short positions in the Treasury futures. This signals that they are again unwinding their basis trades. This bodes ill for Treasury absorption, and would contribute to additional declines in xxxxxx xxxxx xxxxxxxx
Short term T-bill discount rates have soared, which will lead to a Fed rate xxxxxx in xxxxxx.
The Treasury has done massive, unusual T-bill paydowns in recent weeks, seemingly in an attempt to support the prices of Treasury coupons by feeding cash back to investment funds and dealers. It is not working. Mr. I Am The House Bessent is finding out that the players hold the cards, and they are folding and going home. Likewise, the announcement of the new buyback schedule where some operations will at least double, has only sent the message to the market: Panic now and avoid the rush.
Stock valuations, money supply growth, and the ratio of stocks to deposits remain near record extensions, signaling outsized risk, but are not a timing measure. That’s reserved for technical analysis.
Crash risk, previously seen as present but not imminent, may now be manifesting in the Treasury market, with a supply crush the market can’t absorb the biggest proximate risk. The Treasury sending panic signals has only fanned the flames. Further weakening in the bond market runs a significant risk of triggering margin liquidation across asset classes, particularly stocks.
Liquidity is context. Technical analysis provides action signals, given the context. Be prepared to act on whipsaws of bullish technical signals or support breaks. This is no joke.
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