Wednesday, May 27, 2009

2s/10s Curve Just Surpassed Record Steepness

The treasury curve has just imploded, with the 10Y, a massive outlier (especially in a 2s10s30s curve), just hitting a record steepness. The 2s10s just broke the previous wide of 273 bps and at last check was trading at 275 bps. Stocks, as expected compliments of the mysterious Spoos (in)visible hand, still defying gravity.

Zero Hedge friend Mojakus has put together some very interesting thoughts on the negative convexity phenomenon (self fulfilling prophecy) in treasury action today.

The effect is finally being felt in stocks which are getting pounded. Amusingly, while yesterday CNBC had a BREAKING NEWS: MARKET SURGES alert for 4 hours straight, for some odd reason the MARKET PLUNGES alert is nowhere to be found. SHOCKING.

As for what is happening in Bernanke's promised land of cheap mortgages, the chart below does not need an explanation:

hat tip credit trader Sphere: Related Content
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