Archive · 2 Oct 2026
Short Bets on Treasuries Raise US Repo Market Disruption Risks
Some traders are betting that Treasury yields will keep rising.
To make that bet, they borrow Treasury bonds through a market called repurchase agreements, or repo.
When many traders want to borrow the same bond, the borrowing rate can fall because the bond is in high demand.
The current 10-year Treasury note recently became unusually expensive to borrow in this way.
Its repo rate fell as low as 2.70%, compared with 3.92% for more general Treasury collateral.
The Treasury plans to sell another $39 billion of 10-year notes on Oct.
7.
The 10-year yield also briefly climbed to 5.28%, its highest level since 2002.
An analyst said the large number of short positions could make the bond especially volatile over the next two weeks.
The repo rate for borrowing the current 10-year Treasury note fell as low as 2.70% before closing at 3.75%.
General-collateral Treasury repo rates closed at 3.92%, indicating stronger demand for the specific 10-year note.
The current 10-year issue is scheduled for a second reopening, with the Treasury planning a $39 billion sale on Oct. 7.
The 10-year Treasury yield briefly reached 5.28%, its highest level since 2002, before retreating.
Analyst Scott Skyrm said a deep short base could keep the 10-year Treasury volatile over the next two weeks.
- Who
- Traders taking short positions in Treasury securities, alongside the US Treasury, the Federal Reserve and market analyst Scott Skyrm.
- What
- Growing demand to borrow specific Treasury notes is pushing their repo borrowing rates lower and could create funding-market disruptions.
- When
- The rates were reported after Thursday’s trading; the Treasury plans an auction on Oct. 7, with volatility expected over the following two weeks.
- Where
- US Treasury and repurchase-agreement markets.
- Why
- Traders are positioning for Treasury yields to rise, increasing demand to borrow specific Treasury securities.
- Current 10-year repo rate
- The rate traded as low as 2.70% and closed at 3.75%.
- General-collateral repo rate
- The rate closed at 3.92% after trading at 3.86%.
- 10-year Treasury yield
- The yield briefly reached 5.28%, its highest level since 2002.
- Upcoming Treasury sale
- The Treasury plans to sell $39 billion of 10-year issues on Oct. 7.
- Existing 10-year supply
- About $92 billion is already available, including approximately $10.6 billion held by the Federal Reserve.
- Five-year off-the-run rate
- The five-year note sold in August traded as low as 0.75% after reaching minus 1% on Wednesday.
- Expected volatility
- Scott Skyrm expects the 10-year issue to remain volatile for the next two weeks.