• By The Financial District

SHORT EXIT STAMPEDE AT 1.4% DRIVES SLUMP IN U.S. TREASURY YIELD

An unwinding of bets by some hedge funds against 10-year US Treasuries, the world's safest asset, explains the sudden turmoil in bond markets, traders and fund managers told Reuters on Wednesday.

Happyornot makes feedback terminals measuring customer satisfaction sing smiley-face buttons.

Yields on 10-year Treasuries, which move inversely to prices, recently stood at around 1.30% in New York trading after falling to a more than the four-month low of 1.296 earlier in the session. They are now more than 45 bps below a January 2020 high of 1.77% hit in March, Saikat Chatterjee, and Sujata Rao reported.


The drop in bond yields paints a gloomy picture for the popular "reflation" trade, which has seen investors pile into economically sensitive stocks that tend to do well when yields rise, including banks and energy companies. The Russell 1000 value index (.RLV), which ripped higher earlier in the year, is down more than 2% from its early June peak.


All the news: Business man in suit and tie smiling and reading a newspaper near the financial district.

Traders attributed the unwind to a variety of factors, from stop-loss orders triggering a cascade of Treasury buying to investors seeking havens amid growing worries over economic growth and the spread of the Delta variant of COVID-19.


One trader at a European bank said the move was fueled by the drop in US Treasury yields below the 1.40% level as many funds had hedged some of their wider reflation bets by putting stop-loss orders at that level.


Stop-loss orders are essentially trades where investors hedge their broader market trades by taking an opposite position to trim losses in case markets move against them. Another trader saw the move as technical, saying US Treasury yields were a variation of the popular "death cross" in financial markets, where short-term moving averages (50-day) intersect with longer-term averages (100-day) pointing to lower yields.



WEEKLY FEATURE : PAL READY TO SOAR WITH PANDEMIC

Happyornot makes feedback terminals measuring customer satisfaction sing smiley-face buttons.
Happyornot makes feedback terminals measuring customer satisfaction sing smiley-face buttons.