Tags: Treasurys | Trading | Volume | Record

Treasurys Trading Volume Surges to Record High

Wednesday, 15 October 2014 05:45 PM

Trading volume in U.S. Treasury securities surged Wednesday to the highest on record as investors dropped wagers that the Federal Reserve will raise interest rates.

About $924 billion in U.S. government debt changed hands as of 2 p.m. New York time, according to ICAP Plc, the world’s largest interdealer broker. That surpassed the $662.2 billion traded on May 22, 2013, when former Fed Chairman Ben S. Bernanke mentioned the possibility of slowing bond purchases.

“The market has been forced to wake up fast as we are getting capitulation to the broader global forces,” said Larry Milstein, managing director in New York of government-debt trading at R.W. Pressprich & Co. “The Fed is data dependent. Europe is very weak and the U.S. is starting to show weakness, and the market is taking notice, pushing the timing of tightening back, until there is a reason not to.”

The increase in volume comes as Treasurys surged, with 10- year yields falling below 2 percent for the first time since June 2013, after a report showed U.S. retail sales fell a more- than-forecast 0.3 percent in September.

Rates on federal fund futures show the probability of a September 2015 rate increase fell to 35 percent, down from 46 percent Tuesday and 67 percent two months ago, according to data compiled by Bloomberg. The chances for an increase in December 2015 were 61 percent, making it the first instance for a likely central bank move.

Moving Average

The five-day moving average of the amount of U.S. government bonds changing hands on a daily basis has risen to $555.7 billion, the highest on record, according to ICAP data going back to 2004. That compares with an average of $332 billion this year.

A measure of Treasury volatility increased for a third day Tuesday to the highest level in more than nine months. Bank of America Merrill Lynch’s MOVE Index, which measures price swings based on options, climbed to 74.6 basis points Tuesday, the most since Jan. 8.

“When investors began to sense that the Fed’s policy rate in the next cycle might not rise as much in the past, a key fundamental basis that many thought would provide a basis for rising rates was weakened, and the short base slowly covered,” said Tony Crescenzi, a strategist and fund manager at Pacific Investment Management Co. in Newport Beach, California in an instant message. “The more that yields fell the more pain the short base felt, forcing this classic capitulation trade.”

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Trading volume in U.S. Treasury securities surged Wednesday to the highest on record as investors dropped wagers that the Federal Reserve will raise interest rates.
Treasurys, Trading, Volume, Record
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2014-45-15
Wednesday, 15 October 2014 05:45 PM
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