10Y Yields Plunge Below 1.50% As Record Short Squeeze Accelerates (Treasuries Resume Bull-Flattening Trend Ahead of 10-Year Auction)

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by confoundedinterest17

(Bloomberg) — The dollar slipped and benchmark Treasury yields slipped to a one-month low as investors braced for Thursday’s U.S. inflation report that may give clues on the direction of monetary policy.

The greenback weakened against all of its nine developed-world peers. The 10-year rate traded a shade below 1.50%, at the lowest since May 7, before an auction of notes at the tenor. S&P 500 Index futures were little changed, while contracts on Nasdaq 100 rose. Bitcoin added 4%, trading above $35,000.

Do I detect a trend in the 10-year Treasury yield and 10Y-3M Treasury slope?

It is a classic short squeeze on Treasuries where short positions overwhelm long positions.

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Treasuries richer by nearly 3bp across long-end of the curve, flattening 2s10s, 5s30s by ~2bp and ~1bp on the day; 10-year yields around 1.505%, outperforming bunds and gilts by 1bp and 1.5bp

Long-end block purchase was of 905 Ultra Bond contracts, equivalent to over $300k/bp

Cboe interest rate volatility (blue line) is subsiding.

The US Dollar is declining while gold is climbing.

Stay tuned for today’s 10-year Treasury auction at 1pm and tomorrow’s inflation report.

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