“What do you sell if you need to meet margin calls or liquidity? Treasuries and gold,” said Martin Whetton, head of financial markets strategy at Westpac in Sydney.
Buyers were so scarce that the selling pushed bond yields out of line with swaps and sharply widened a usually steady spread between the two.
At the 10-year tenor the gap has shot to more than 50 basis points, the largest on record, while the speed of the move in the past few days has also been record-breaking.
“It just is a further validation of the theory that there’s less physical buying of Treasuries,” said Andrew Lilley, chief interest rates strategist at Sydney-based investment bank Barrenjoey.
“There’s a period of time in any market blow up, where you are not even attempting to think through the implications. You are simply liquidating all your risk.”
Lilley said markets may also be starting to come to terms with a changed trade outlook that could reduce foreign…
