- It should be no surprise that profit-maximizing speculators will seek the best risk-adjusted returns wherever and whenever they might perceive them.
- While the securities lending side of the financial world can be and most often is pliable, fungible, and, at times, horrifically forgiving, there can be situations such that there are "too many" shorts.
- The UST shorts simply contributed to the already-underlying shortage, and in a sense exposed it even further at a very inopportune moment for their reflation thesis - the source of much confusion.
- Shorting USTs and reflation go hand in hand, just like collateral shortage definitively states that nothing has fundamentally changed underneath all that.
For further details see:
Deja Vu: Treasury Shorts Meet Treasury Shortages