FAST FIVE: Forget The 10-Year: "The Scariest Chart For Investors" Is The 2-Year Yield

This was confirmed one month ago by Morgan Stanley which said that “Soaring Libor Is The Story Of The Year, Not The Fed”, although as Citi's Matt King subsequently explained , the two are intimately connected (and that the surge in L-OIS has nothing to do with T-Bill supply and little if any impact from the new BEAT tax).

Why Citi Is Suddenly Freaking Out About The Exploding LIBOR-OIS Matt King: This Is The Real Reason Behind The Blow Out In Libor-OIS Feud Breaks Out Between BofA And Credit Suisse Over Cause Of Libor-OIS Blow Out And yet, while Libor has continued to rise and was up again at 2.36% most recently, rising 1% in just the past 6 months, the funding problems revealed by the surge in Libor mainly impact the (corporate) supply side, where as we showed yesterday, cash-rich corporations have not issued a single investment grade bond so far in 2018 as a result of Trump tax reform, making short-term liquidity even tighter in what is now an increasingly troubling instance of private sector “QT”, one which merely adds to the tightening launched by the Fed's rolloff of its own balance sheet.

Meanwhile, on the demand side, the recent spike in yields has made funding conditions just as problematic.

As Tchir points out, the surge in two-year yields to the highest since 2008, is “the scariest chart for investors” while one-year bill rates are, predictably, also the highest in almost a decade.

“The 10-year yield might attract all the attention but higher short-term yields are more problematic,” Tchir wrote in a note Wednesday.

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