Market Extra: More pain likely for hedge funds as leveraged investors unwind wrong-way bond market bets, traders say

Published Nov 09 2021 at 9:02 PM GMT
  • ImagesThere"s likely more pain coming for hedge funds, the heavily leveraged investors which are incurring significant losses from wrong-way positions on the direction of interest rates in the US and across the world, traders say.
  • Some hedge funds had expected major central banks like the Bank of England and Federal Reserve to turn hawkish on monetary policy given persistent inflation pressures and were caught off guard in the past week by unanticipated dovish pivots, as well as by the flattening of bond-market yield curves.
  • Leveraged players are continuing to unwind their positions, with no let-up in sight, according to traders.
  • The continued need of hedge funds to short-cover, or buy back securities to close out open short positions, is said to be one of the contributing factors behind Tuesday's decline in US Treasury yields across the curve.
  • Meanwhile, bond-market yield curves flattened in the U S, U K, Germany, Italy, France, and Australia, according to Tradeweb data, resuming a pattern that sometimes points to economic trouble.



  • Published Nov 9, 2021 9:02 PM GMT