4.25% repo on 10Y and other volatility warnings

Hammock over the emptinessWe saw some pretty unusual stuff on the markets last week. There is a lot of nervosity in the markets. A foretale of more significant moves?


The crazy stuff

  • The repo on the 10 Y treasury has reached 4.25% on Thursday, which is more than the failure to deliver rate. The demand for borrow was such that virtually all the bonds at the treasury fed ($14.5 bn) were on loan.

10Y overnight repo rate

  •  Rates were on historical lows. When rate rally started, all the investors rushed to the door at the same time. It’s not over; analysts are forecasting a further increase in the yield.
  • On Friday, the S&P dropped ~2% from its opening, before closing up 1.95%. Those typed of behaviors are typical of a strong market nervosity (read “volatility”), even if it is not materialized yet in the close-to-close volatility calculations.

S&P Giration

  • On the S&P, Friday was one of the largest intra-day reversal ever:

  • Actually, the VIX rallied up to 32 on Powell’s speech, before closing back at 24 on Friday

VIX move

  • There was a rotation of stocks in the S&P, with notably a rally of the most shorted stocks

Most shorted stocks


Going forward…

  • The rates are not rising just in the US. It is a global issue

Rising rates over the world

  •  The equity market is overvalued, but the Fed and the new 1.9 Tn stimulus plan supports the economy. The eternal question is – for how long? Could an event trigger a crash?
  • Talking about a possible event, Nick Panigirtzoglou, JP Morgan’s quant analyst, 60:40 funds now have to rebalance and sell an estimated $107 Bn of equities. This will come on top of $110 bn of redemptions from pension investors, $22 Bn from Norges Bank, and $34 from Japan’s government pension fund, bringing the expected selling pressures on equities around $316 Bn for the end of this quarter.

Read our privacy policy for info.

Follow on LinkedIn

Click here to follow Gontran de Quillacq

If already following, go to LinkedIn profile

Written by Gontran de Quillacq

Gontran de Quillacq is an expert witness and a legal consultant. He is a recognized authority in options, trading, derivatives, structured products, portfolio management, hedge funds, mathematical finance, quantitative investment, strategy research and financial markets in general.



  1. The Tesla and Bitcoin lures | Navesink International - […] bn x 40% would represent $16 bn invested into stocks. That’s not much, considering that $380 bn of institutional…

Submit a Comment

Your email address will not be published. Required fields are marked *

You May Also Like…

Archegos: the questions nobody asks

Archegos: the questions nobody asks

What happened at Archegos? A lot has been published already, but many critical questions have still not been asked. After a factual summary / press review, this article asks the missing critical questions.

read more
“I’m going rogue”, claims the principal

“I’m going rogue”, claims the principal

Guy Gentile is a principal with a checkered past: pump-and-dump, lack of registration, soliciting US customers from the Bahamas… He’s not hiding that he went rogue.
He just got sued by the SEC for evading US stock trading regulations. Again.

read more
Cannabis: Wild West meets Wall Street

Cannabis: Wild West meets Wall Street

The cannabis industry is growing up, getting sophisticated. Perceptions are changing, but regulations are inconsistent. The smart money has arrived.
Here are the regulatory, financial, and investment challenges, as well as the opportunities, driving this rapidly evolving market.

read more

Pin It on Pinterest