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.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
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. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
You may also like
SG’s Ungari swaps research for structuring in new QIS role
Veteran researcher and strategist ‘putting things into action’ with new remit
The WWR in the tail: a Monte Carlo framework for CCR stress testing
A methodology to compute stressed exposures based on a Gaussian copula and mixture distributions is introduced
Fed’s proposed SCB tweak would free $20bn of capital at US banks
Averaging of stress test-based inputs over two years would reduce current add-ons by up to 60bp
Yen rates losses from tariff drama top $1 billion
Pay fixed, curve flattener and vol steepener positions were hit hard as yields swung wildly
Markets are mispricing tariff uncertainty, say academics
Johns Hopkins economists warn of risk from changes to the ‘rules of the game’
‘This is not a wobble’: Brunello Rosa on the path to de-dollarisation
Digital currencies will play a central role as China challenges US hegemony, says economist
Synthetic deals drive securitisation RWA surge at EU banks
BNP Paribas and RBI lead Q4 rise
Sponsor content
These articles were paid for by a contributing third party.More Information.
More on Investing
Markets are mispricing tariff uncertainty, say academics
Johns Hopkins economists warn of risk from changes to the ‘rules of the game’
‘This is not a wobble’: Brunello Rosa on the path to de-dollarisation
Digital currencies will play a central role as China challenges US hegemony, says economist
Mitigating risks with derivative ETFs
S&P Global Market Intelligence's Enrico Piccin discusses the evolution of synthetic ETFs, regulatory impacts, and balancing leverage and transparency
Pimco’s $19 billion Sonia swaptions trade
Counterparty Radar: Bond giant springs up as largest player in space among US mutual fund managers, with Guggenheim shadowing its move
How Florida’s pension plan foresaw deglobalisation and trimmed its risk
Retirement fund reduced exposure to public equities more than a year ago
Asia’s bond investors hesitant to buy US dip, say dealers
Insurers and pension funds have been slower to step in than usual during sell-off
How Trump’s trade talks may play out
SSGA’s chief geopolitical strategist on which tariffs stay in place and who blinks first in negotiations
Market whipsaw spurs calls to rethink buy-side stress-testing
Risk Live Boston: Morgan Stanley and BlackRock urge rethink of scenario assumptions and top-down factor models
