Asset managers and hedge funds are increasingly taking different positions inside the most liquid government-securities market in the world — and the gulf...
Asset managers and hedge funds are increasingly taking different positions inside the most liquid government-securities market in the world — and the gulf has only gotten wider this month.
The different views of the fast-money and real-money crowds helps to explain why the 10-year Treasury yield BX:TMUBMUSD10Y has zigzagged in August, going from its highest closing level since November 2007 down to almost three-week low on Tuesday. “Hedge funds will continue to push record shorts in Treasury futures on the view the economy is unlikely to slide into a recession,” said Ben Emons, a senior portfolio manager and head of fixed income at NewEdge Wealth in New York. Meanwhile, the retail public is flocking to Treasurys “on a view that rates are likely to stay higher.”
Already, the Treasury basis positions have spilled over into other areas such as Treasury options and what’s known as a “skew,” the portfolio manager said. A “skew” represents the difference between call and put volatility, and is currently negative.
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