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.
Rokos Capital Management and Alphadyne Asset Management have incurred losses as a result of wrong-way positions on government-bond yields, Bloomberg News reported here.
The full article is available at https://www.reuters.com/article/usa-markets-illiquidity/rising-treasury-market-illiquidity-could-pose-financial-market-risk-bofa-idUSL1N2RS1N2