(Bloomberg) — The U.S. Treasury Department asked holders of large positions in a 10-year note it issued last year to identify themselves, tapping rules used sporadically since the 1990s to guard against market manipulation.
Anyone whose position in the 0.875% Treasury maturing in November 2030 amounted to $4.1 billion or more on Nov. 16 or Dec. 14 needs to report back to the government by July 22, according to a statement released Thursday. That was the benchmark 10-year Treasury at that point in the fourth quarter.
This large-position reporting program, established in 1996 in response to a Salomon Brothers bond-market scandal, aims to prevent improper trading activity, such as efforts to corner the supply of a security to drive up the cost of closing short positions. This is the 17th time the department has made such a request — the last being in June 2019 — and prior instances have included periods when a specific security became scarce and expensive to borrow in the repurchase agreement market, a sign of a large short.
A Treasury official said on Thursday that the latest request doesn’t mean something nefarious or manipulative happened in late 2020. The Treasury’s debt-management teams try to request these reports about once a year, but can’t always, officials said.
Treasuries were diving in November 2020, driving yields higher. The benchmark 10-year yield moved from as low as 0.72% in November to nearly 1% in early December. By March, the benchmark 10-year yield had risen to its highest level in a year at 1.77% while the cost to borrow the debt in the repo market surged as demand grew to short the security. The interest rate on overnight repo rate for cash loans backed by debt plummeted below minus 3% — driving failed trades to the highest in months.
Treasury yields have since plunged and issues in the repo market subsides. The current benchmark 10-year yield is now at about 1.30%
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