Treasury Basic Trading Reaves Bead Again

Our overhauled colleagues yesterday significant story Recently, the United States has been filled with the strange behavior of the US government bond market, unfortunately buried with the flying flight.

Fortunately, it helps us to explain why the US Treasury hit the US Treasury Down again in worse tariff headings. From the story of Monday, Alphaville’s emphasis below:

The debt of the US government has returned the risks in the strategies of hedges and strategies, and investors continued to change the cash in cash in the Wall Street on Monday.

According to Benomberg, 10 years of treasury productivity increased by 0.19 percent on Monday, 0.19 percent, the largest daily renewal since September 2022. 30-year-old productivity has jumped 0.21 percent points in the largest movement since March 2020.

. . . Investors and analysts, especially the “main trade”, pointed out the hedge funds that benefit from small differences in the price of treasures and related futures contracts. These funds, which are a great player in the stable income market, are required to sell the risks with treasures.

“Hedgehogs trading the funds under the US treasure,” said a hedging fund manager.

The 10-year treasury for sale continued with a 10-year treasury product with 4.29 percent of the pixel. The 13 main points a day are a very small movement and the 10-year productivity has seen 42 BPs since April 4, 42. This remains a “risk-off” dominant feeling.

The Bespoke Investment Group wrote in a report today as George Pearkes:

Today, in reverse of shares, more than 1.5% of the market near the market, in the heights of more than 1.5%, in the heights of more than 4%, in fixed income are more problematic. During the last two days, 30Y Ust productivity increased the cruel 35 BPs. This is not always superior, the best 0.4% of all 2 daily movements for an extremely unusual, long bond product.

It is more unusual, the fall of something related to the fall of this great increase in bond products. In fact, this is the largest two-day increase in the same spanda since 1982!

Sunday drivers are always hard and there are numerous culprits behind the sale of treasury as a Weak auction of three-year notes and Trade of Treasury Exchange Happiness. However, the treasury base trading seems to be a great factor behind the cracks in the US government bond market.

Until Alphaville readers know above average Interested in the treasury base trade and since then The Bejesusus was afraid of us Returned in March 2020.

Treasury futures contracts can usually deliver to a reward as a reward, to ensure a contract, to ensure the derivatives contract. Basically, because they are a convenient way for investors to avoid exposure to treasures (you should only put an initial margin for the nominal exposure to be purchased). Active managers, for example, are as a result of long treasure futures.

However, this premium opens an opportunity to get the other side for hedging funds. The treasury sells futures and sells treasure wishes to hedge themselves by capturing almost risk-free spread of several main points. Normally, Hedge Foundation Managers do not leave the bed for several-dimensional BPs, but the treasures can use many trade because it is so solid, too times.

Let’s say you get $ 10 million for treasures and you sell the equivalent value of futures. You can then use treasures as collateral, say, 9.9 million dollars in the repo market. Then you buy another dollar from another treasury, sell the equivalent amount of treasure futures and repeat the process again and again.

It is difficult to get a solid opinion on something that has a typical amount of goal used by hedging funds for the main trade, but Alphaville can be 50 times normal and 100 times can be 100 times. In other words, only $ 10 million can support up to capital $ 1 billion treasure shopping.

How important is trade in the aggregate? Well, for many reasons, for many reasons, but the best proxy for the total size, is a net short treasure futures position of Hedge funds currently outside $ 800 billion, there is a mirror image on the long side

The problem is that both treasury futures and repo markets require more pledges when there is an unusual amount of volatility in the treasury market. If the Hedge Foundation cannot do as a pony, the loan can seize the pledge – treasury bonds and sell it to the market.

As a result, as Apollo’s Torsten Sløk is a great threat to the market that is the equivalent of the financial system’s financial system bomb shelter equivalent erected Today before:

Why is this problem? Because cash monetary futures are the source of basic trade instability. In case of exogenous shock, long positions of long positions used in cash in cash with hedge funds are highly used in the risk. Such an opening, in a short time, itself is a capital restrictive. This can lead to a significant violation such as market functions of brokerer-dealer companies, to give liquidity in the market for treasures and lending to the treasures.

We saw how the secret sensitivity could morph in March 2020 how morph, those with bond funds sank by foreign central banks and investors, the most supplied asset was forced to crush: US treasures. This is a terrible treasure businessman, a cataklist hedging funds that threaten a treasury treasury chariot to turn a cataklist financial crisis.

Only Herculean Efforts of Federal Reserve – Balance sheet only $ 1.6tn one month – prevented this.

What happened on Friday and Monday, in March 2020, the US Treasury Market, which is more than a week, approached the bed for the whole global financial system. But as our colleagues erectedThe variability has been high and offers a lot of turmoil trade, which is sold in a violent way yesterday, at least some handools are forcibly canceled:

Daily change (interest points) column schedule sells us 10 years of treasurer

Many regulators and Police At least, since the fed’s actions gave a result, they have been concerned about the main trade of the treasury in fact the entrance of the strategy. Basic trade, because before March 2020, it has further increased these concerns because it was swollen.

Unfortunately, it has become a strong column for the treasury market, at a time when the main trade has already balanced the main trade, the US government’s debt costs.

Like Citadelin Ken Griffin note Back in 2023 – SEC President Gary Gensler has a strategy in Crosshairs – the killing of trade on the basis of the treasure “Giving a new debt of $ 1 billion-dollar TONE.”

So far, such as canceling any basic trade, it has a great impact on the treasury market. In 2020, however, the terrible, as well as how to move down the product, how was the trade class trading in an active class how trade in trade.

So far, it does not seem so far, even today, even if today is higher in risk-off days, today is a little concern. However, the indicator of the liquidity of the Treasury market of Bloomberg (Caveats!) Recently became a little loop, so it is one to keep an eye.