Failure to deliver for all 10-year notes rose in the week endedMarch 2 to US$32.3 billion, from $132 million the week before, thelatest data from the Federal Reserve Bank of New York show. Thefigure is the highest since June 2013, when Treasuries tumbledafter then-Fed Chairman Ben S. Bernanke signaled the central bankmight slow its bond buying, an episode dubbed the “tapertantrum.”

There is a history of rising demand for specificmaturities in the repurchase-agreement (repo) market in thedays just before auctions as traders sell—or go short. Yet thistime, the phenomenon was apparent well before the governmentissued 10-year notes on March 9. So many traders were amassingshort bets on the on-the-run note maturing in February 2026 thatits repo rate was pinned near negative 3 percent for much of theweek, leaving it “on special” in trader parlance. A rush of corporate-debt issuance was partly to blame,according to Peter Tchir at Brean Capital LLC.

“There was this weird anomaly of less 10-year Treasury notesupply at the same time there was very strong demand forhedging-related sales, particularly versus corporate bonds,” saidTchir, head of macro strategy in New York. “This situation willstay for a little while.”