Last week we warned of a potentially problematic scenario evolving in the arcane and nuanced details of the Treasury Bond futures market.
As we detailed previously, the relatively rare - but not inconsequential - technicality that is looming involves a big duration shift in the cheapest-to-deliver (CTD) bond underlying the Long-Bond contract and its potential to impact not just day-traders but the highly-levered, and systemically-threatening, basis-trade, as duration mismatches could ring bells of LTCM past as 'arbs' blow up.
Regulators are worried:
