Money to be made

Is nobody out there keeping treasuries in check?

The flight from risk averse assets into riskier and less liquid paper manifested it self in the Treasury market. I have chronicled here over the last couple of months the story of several off the run bonds which had become extremely cheap on the curve or had recounted instances of off the run issues which had had produced strange relationships.

As an example the 8 1/8 August 2019 bond has traded as much as 70 basis points cheap to the 10 year note. The 10 year note is a November 2018 maturity and there is no reason why one should pick up 70 basis points for a three month extension. That spread narrowed 6 basis points today and has narrowed over the last several days to 57 basis points.

Then there is the story of the August 2023 bond and the November 2024 bond. The yield curve is positively sloped in which case rolling back on the curve should cause one to give up Not so in the relationship between these bonds. That spread had been such that you could sell the 2024 and roll backwards to 2023 and pick 36 basis points. That spread is 28 basis points today.