A trader works on the trading floor at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., August 9, 2021. REUTERS/Andrew Kelly/File Photo

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NEW YORK, Nov 1 (Reuters) – Rising illiquidity in the $14.8 trillion U.S. Treasuries market could spill over into other financial markets as hedge funds reduce their capacity to take on risk, Bank of America warned in a report on Monday.

Leveraged hedge funds in particular have likely suffered large losses from the rapid increase in short-term Treasury yields, the report added.

“These moves have exposed still fragile U.S. Treasury market conditions,” Mark Cabana, head of U.S. Rates Strategy at Bank of America, wrote.

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Rokos Capital Management and Alphadyne Asset Management have incurred losses as a result of wrong-way positions on government-bond yields, Bloomberg…

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