Relative value trades face Treasury clearing squeeze
SEC’s clearing proposals may hurt levered basis trades and worsen illiquidity in off-the-run bonds
The Treasury basis trade has become a go-to strategy for hedge funds looking to exploit pricing wrinkles in rates markets. The trade hinges on wafer-thin differences between cash bonds and Treasury futures.
Now, the arbitrage opportunity may be about to shrink even further.
A move by the US securities regulator to force firms to clear Treasuries has raised fears that relative value strategies such as the Treasury basis trade could become unprofitable. The extra costs incurred by mandatory
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Investing
Altice’s dropdown is a warning for European creditors
Carve-out used to shield assets from lenders may occur in a fifth of European deals
How Jupiter times factors in uncertain markets
Asset manager is seeking to avoid momentum and value drawdowns
Fed green lights more capital relief trades
Five US banks authorised to issue repeat credit-linked notes backed by financial guarantees
Investors cheer early refi of bank AT1s
Buyers say trend is a “win-win” for asset class shaken by Credit Suisse collapse
Napier Park to increase investment in bank risk transfers
Hedge fund sees secular trend in lenders offloading credit risk, and plans to be part of it
BMO’s cloud migration strategy eases AI adoption
Canadian bank is beginning to roll out GenAI tool for internal use cases
Execs can game sentiment engines, but can they fool LLMs?
Quants are firing up large language models to cut through corporate blather
How Man Group’s private credit arm keeps risk in check
Mid-market lending no place for weak covenants, flexible addbacks or payments in kind, says Varagon CEO
Most read
- Breaking out of the cells: banks’ long goodbye to spreadsheets
- Too soon to say good riddance to banks’ public enemy number one
- Industry calls for major rethink of Basel III rules