Reactions to bond market selloff

Key Points

  • U.S. Treasuries experienced heavy losses due to a global market rout triggered by U.S. tariffs.
  • Hedge funds' unwinding of 'basis trades' contributed significantly to the market volatility.
  • Analysts suggest potential central bank intervention if market instability persists.
  • There's concern over financial stability and potential retaliatory actions by countries like China.

Summary

The article discusses the significant losses in U.S. Treasuries, driven by a global market sell-off initiated by U.S. tariffs. Hedge funds, facing increased margin calls due to market volatility, have been forced to unwind their 'basis trades', exacerbating the situation. Analysts like Mark Elworthy from Bank of America highlight the extreme volatility, comparing it to events like the Global Financial Crisis and the onset of the COVID-19 pandemic, suggesting that central banks might need to intervene. There's also speculation on whether the U.S. administration will respond to the market turmoil, especially if it threatens financial stability. The market's reaction has been influenced by fears of retaliatory actions from countries like China, potentially selling off U.S. Treasuries, which could further destabilize the market. The situation has led to a sharp rise in U.S. Treasury yields, with some market observers drawing parallels to past financial disruptions caused by similar trading strategies.

yahoo
April 9, 2025
Stocks
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