Cycle Trading

[No-Quarter]

Duma, remember this conversation we had a month or so back?

https://investorshub.advfn.com/boards/read_msg.aspx?message_id=161598628

It appears the fireworks could start mid-day tomorrow with J Powells scheduled broadcast to Wall Street. Any ideas how we can best position ourselves today to profit from it?

Below chart and pull quote from here -
https://www.zerohedge.com/markets/historic-repo-market-insanity-10y-treasury-trades-4-ahead-monster-short-squeeze

Actually scratch that: last week there were barely any shorts in the 10Y - that's why the massive stop loss liquidation after last Thursday's 7Y auction was just longs puking. It was only after that the flood of shorts arrived and hammered the 10Y to "fails" levels in repo.

What does that mean in English?

As we have discussed in the past, TSYs trade special, or anywhere between 0% and -3% in repo (and while they may trade at, they never drop below the fails charge), whenever there is a massive pile up of shorts. Think of it as a borrow on a stock at some insane percentage: 100%, 1000%, etc. It's similar in rates, only such mechanics take places in the repo market and a rate of -3% is usually considered the equivalent of extremely hard to borrow. Even so, never before have we encountered a 10Y trading so special it was below the fails charge.