Zoltan Pozsar on What Just Happened with the Treasury Market
Odd Lots
Bloomberg
4.5 • 2K Ratings
🗓️ 4 March 2021
⏱️ 46 minutes
🧾️ Download transcript
Summary
The Treasury market just experienced what some might call a tantrum. Across the yield curve, we saw rates shoot up. And it's not even clear why it happened. There was no comment from a Fed official like there was with the 2013 taper tantrum. No single datapoint that stood out. On this episode, we speak with Credit Suisse's famed strategist Zoltan Pozsar about what happened to cause this selloff, what it says about Treasury market structure, what reforms may be coming down the pike, and whether the Fed needs to act further to restore order to the market.
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Transcript
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| 0:54.4 | Hello and welcome to another episode of the Adlots podcast. I'm Tracy Alloway. |
| 1:00.0 | And I'm Joe, why isn't all? So Joe, it's, well, there's been a bit of drama in the treasury market |
| 1:07.2 | once again. Yeah, I noticed you got to do one of your Tracy Alloway signature things. |
| 1:13.7 | Were you talking about a move that happened that's only supposed to happen like once every |
| 1:17.5 | three billion years? Yes, I love talking about those because it really gives everyone the |
| 1:22.0 | opportunity to show that they've read to Lebs books by saying that the world isn't normally distributed. |
| 1:28.0 | But of course, we did see some pretty big moves in the treasury market. So first of all, |
| 1:33.2 | the 10 year yield jumped up to 1.6%. This was in the last week of February. |
| 1:40.8 | But the really big move came in the five year. And I think that one had something like a seven or |
| 1:47.3 | eight standard deviation move. You know, one of those things that's only supposed to happen in |
| 1:52.4 | like 10 billion years kind of things. And really, I know people make fun of standard deviations |
| 1:59.1 | and sigma events. But really, we're talking about the world's most liquid market and stuff like |
| 2:05.2 | this keeps happening. This is I think the fourth big bout of treasury market chaos that we've had |
| 2:13.0 | in just a couple of years. So I'm thinking back, we had one in what was it September 2019, |
| 2:19.1 | we had repo madness, then we had the March chaos in 2020 with the levered USD trades blowing up. |
| 2:26.0 | And then we had a mini rates blowout in October 2020. And now we just had the most recent incident. |
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