Posted by Not that either the SEC or the Holder-led Justice Department would do anything about it. This happened July 21:
Jack Barnes writes : Someone dropped a bomb on the bond market Thursday – a $1 billion Armageddon trade betting the United States will lose its AAA credit rating.
In one moment, an invisible trader placed a single trade that moved the most liquid debt market in the world.
The massive trade wasn’t placed in bonds themselves; it was placed in the futures market.
The trade was for block trades of 5,370 10-year Treasury futures executed at 124-03 and 3,100 Treasury bond futures executed at 125-01.
The value of the trade was about $850 million dollars. In simple terms, if that was a direct bond buy, no one would be talking about it.
However, with the use of futures, you have to have margin capacity behind the trade. That means with a single push of a button someone was willing to commit more than $1 billion of real capital to this trade with expectations of a 10-to-1 return ratio.
You only do this if you see an edge.
This means someone is confident that the United States is either going to default or is going to lose its AAA rating. That someone is willing to bet the proverbial farm that U.S. interest rates will be going up.
I believe what happened is a debt-ceiling deal was done in Washington and leaked to a major proprietary trader. Everyone knows the debt negotiations in Washington have been an extreme game of brinksmanship between political parties, but now someone knows how that game played out.
This had the hallmarks of one of the largest bond shops in the world knowing something the rest of the market didn’t.
The number of shops or even central banks that can take on this level of market risk is extremely small. Some that come to mind are hedge fund manager John Paulson, Bill Gross’s PIMCO, and the U.S. and Chinese central banks.
Because it appears there has already been some funny business regarding Standard and Poor’s:
An item in Politico’s Morning Money caught my eye:
BEHIND THE MUSIC – S&P’s John Chambers has met with a number of big investors include Pimco’s Mohammed El-Erian. Apparently he is telling them he prefers Reid’s plan.
CNN’s Erin Burnett also tweets that the “source who met with Standard and Poors says SIZE of Boehner plan is the problem.MIGHT not be enough to avert downgrade,needs to be closer to $3TR all at once.”
If these reports are correct, S&P is meeting privately with big investors and giving them information that they are not giving the public about about what their research says, what position they will take, and what they intend to do with regard to a potential credit downgrade of US debt.
This appears to be “selective disclosure” to big investors on the part of Standard and Poor’s. And while putting a $4 trillion number on a deficit reduction package might be in violation of the IOSCO code of conduct, “selective disclosure” is in violation of SEC rules.
As Comrade Driftglass likes to say, there is a club and you’re not in it. It also appears that this could be retaliation by S&P for the government’s considering fraud investigations against them. This being the Obama Administration, the government will, of course, crumple
We are still ruled by sociopaths.
Related: As I noted before, the only risk is a political risk–the U.S. public debt is denominated in dollars. We can’t run out of dollars.
August 6, 2011
August 6, 2011
August 6, 2011
August 6, 2011
August 7, 2011
August 7, 2011
August 7, 2011
