She cannae take any more, Cap’n!
— Scotty, on Star Trek
Escalating failures to deliver in the Treasury market â€“ essentially, Treasuries sold/borrowed arenâ€™t being delivered or returned â€“ are deeply worrying. Itâ€™s like a system, over-taxed and already badly broken, being forced to do quintuple-duty and coming awfully close to a smoking wreck:
Fails to deliver in the treasury markets are not a new phenomenon. There is data for fails for treasuries, agencies and mortgage-backed securities as far back as 1990, says Susanne Trimbath, an economist, and former employee of the Depository Trust Co, a subsidiary of Depository Trust and Clearing Corp.
Back then, though, there would be $50 billion of fails in a whole year, she says. That figure has grown enormously. Failures in US treasuries were 8.6% of all treasuries outstanding in the first five months of this year, compared with 1.2% in the first five months of 2007. That has ballooned further over the past three months, hitting more than $2 trillion for almost the entire month of October â€“ more than 20% of the daily treasuries trading volume. [Emphasis mine]