Perhaps someone has seen an opportunity to destabilize the market?
I know...no such thing as a conspiracy.
No, it is more likely that some big funds and/or insurance companies are in illiquid commercial debt paper and are using swaps to maintain their duration while gaining some liquidity. That’s just one idea; there are doubtless other explanations.
As a taxpayer, I now want the Treasury to start selling as much 30 year paper as they can print. If there are idiots out there who want to loan the US government money for 30 years at such low interest rates, it would benefit the taxpayers for the Treasury to lock in that rate.
Back in October (third/fourth week) I remember seeing swaps on the 30 being wicked tight — like 3bp and less - while the 2 year was out over 100bp. Absurd. But there it was.
Leveraged plays in illiquid instruments in a market like this makes people do desperate things. And desperation in this market is starting to manifest itself in truly odd ways.
I’ve said this before...
Did we just take a terrost direct hit to the financial market?