MesaZona > Table of Contents : Here's The Menu. Enjoy
20 July 2020
Back-In-Focus: Hedge Fund Shenanigans
Oops! Hold on just a minute!
Bernanke and Yellen Refocus Blame on Hedge Funds
The former Fed chiefs offer a reminder about the origins of March’s Treasury market meltdown
By
Brian Chappatta
July 20, 2020 2:00 AM
They know what they’re talking about.
Photographer: Elijah Nouvelage/Bloomberg
LINK >
https://www.bloomberg.com/opinion/articles/2020-07-20
Just a reminder from your friendly neighborhood former Federal Reserve Chairs: Hedge funds probably blew up the world’s biggest bond market in March and helped usher in unprecedented central bank action.
Ben S. Bernanke and Janet Yellen, who combined led the Fed for more than a decade, delivered testimony last Friday to the House Select Subcommittee on the Coronavirus Crisis. Much of their remarks focused on the urgent need for Congress to take further fiscal action to offset the economic shock caused by the pandemic. However, in their
writing
on the Brookings Institution website, they also took some time to lay out their thoughts on steps taken by their successor, Jerome Powell, and his fellow central bankers . . .
Now four months removed from the worst of the market chaos, it’s worth stepping back and remembering what exactly transpired . . .
Any investor could be forgiven for not remembering that a
little known trade
popular among hedge funds, known as the cash-futures basis, was what set the U.S. Treasury market maelstrom into motion
. . .
Something Snapped
March's extreme rally in Treasuries broke a popular hedge fund trade, forcing them to unload bonds into a strained market
Source: Bloomberg
____________________________________________________
The good news, for now, is there’s little evidence hedge funds are piling back into the trade. The Cayman Islands, seen as a proxy for all kinds of leveraged accounts, was a net seller of long-term U.S. Treasuries in April and May. It shed more than $100 billion of the securities in March, far and away the most in history. . .
As Bernanke and Yellen pointed out, hedge funds would be a logical first place to look for answers.
Once-in-a-century pandemic or not, Treasuries simply
do not trade
the way they did in March without something going haywire. Whether it was their intention or not, the former Fed chiefs deserve praise for bringing hedge-fund shenanigans back into the picture.
Newer Post
Older Post
Home
The May 8, 2024 Severe Weather Outbreak, As It Happened…
The Week That Was: Techdirt
This Week In Techdirt History: April 28th – May 4th Techdirt from the that-was-that dept Sat, May 4th 2024 12:00pm - Leigh Beadon Five ...
Ukraine Tightens Military Procurement After Corruption Shakeup...Ukraine's defense minister resigns in wartime shakeup | Reuters
Shining a light on corruption while being honest about its scale is not merely a matter of accuracy—it is a matter of Ukraine’s survival. In...