Treasury Short Squeeze in June

Earlier this summer, the 10 year note yield fell to below 4%, which caused a “conundrum” in the face of Fed efforts to boost interest rates. According to this article in the NY Times, the lower yields might have been caused a short squeeze. From a real estate and mortgage perspective, the short squeeze theory of low yields is interesting because it suggests that the low yield at the time was both artificial and temporary.


“A STORM swept through the United States Treasury market in June, creating big losses at banks and brokerage firms and bringing back memories of the infamous short squeeze by Salomon Brothers in 1991 that ultimately brought the firm to its knees.
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The recent turmoil is a troubling sign that the pools of capital at hedge funds and investment firms have grown so enormous that they can easily swamp the government securities market, one of the world's deepest, most liquid and heavily used financial markets. The upheaval also involved a short squeeze - financial-speak for what happens to short-sellers when they are forced to stanch their losses in a buying spree that sends prices higher and higher.”

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