These things are always hard to pin down in the moment, but much of the spike in US yields appears to be down to unwinding of the basis trade.
I’ll do a brief explainer but TLDR: hedge funds borrowed to exploit a trade which was reliably profitable but with very small margins, it’s now blowing up.
I’ll do a brief explainer but TLDR: hedge funds borrowed to exploit a trade which was reliably profitable but with very small margins, it’s now blowing up.
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Because the profit per trade is small, they borrow lots of money.
We now have a similar dynamic unfolding in the US.
Since that borrowing was used to carry out the basis trade - including buying Treasuries - cutting back means the reverse.
More Treasuries are flooding onto a market already crashing - amplifying the situation.