Big bets by hedge funds against Treasurys pose a risk to the global financial system, the Bank of England has warned.
Big bets by hedge funds against Treasury securities pose a risk to the global financial system, the Bank of England has warned.
The BoE... Big bets by hedge funds against Treasury securities pose a risk to the global financial system, the Bank of England has warned. The BoE said its “market intelligence” suggests these futures positions are not outright bets that government bond prices will fall and yields rise, but trades relative to bonds or swaps.
The trade blew up the bond market in early 2020 when the COVID pandemic caused a surge in Treasury volatility amid a surge in demand for government debt.“For instance, over recent months, leveraged hedge funds have built up large positions in U.S. Treasury futures, which market intelligence suggests are relative to bonds or swaps. If these markets were to move sharply, deleveraging these positions could further amplify stress,” it said.
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