Mine Print Hash

Large reduction in open interest on long-end UST futures in Monday's session. Pink & Cyan bars represent long end UST futures in screenshot below. Think of this like one cat from the litter in Bassman's "A Fat Cat in a Small Door" post getting through ... and so far all OK. This could represent the beginning of a broader liquidation ... or an orderly risk reduction that defuses/prevents one. Alternatively, there's a competing explanation that Dallas Fed researchers presented in a research note last week that proposes structural capital flows as a root cause, where falling UST futures activity reflects a shift away from the cash-futures basis trade towards swap-spread trades. If that alternate explanation holds true, the authors suggest we may be seeing a structural change in how & where long-duration risk is intermediated (from futures to swaps) and the developments we're seeing is not solely the beginning of a disorderly liquidation process but a bigger structural change. Look at Monday's OI development as a test run for a packed calendar the next 5-6 weeks for the long end to navigate: (1) 20 year auction tomorrow (10/21) (2) elections (11/3) (3) QRA (11/4) (4) Dec-to-Mar ZB & WN (last week of Nov) With the selloff in $CRWV senior unsecured debt showing the importance of long-term capital access to the firms involved in the AI buildout, I would not be surprised to see companies in this sector building their own experts on staff to ensure undisrupted access to credit markets in the coming years as availability, terms, and pricing of available credit becomes just as important of a bottleneck as your GPUs, rackspace, transformers, electricity, etc.