#ForexChief #Treasuries #stocks #Market #forexnews #Fed #worldnews ⠀
⚠️ Hedge funds are trading: we expect chaos in the markets
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The US national debt is growing at a rate of approximately one trillion per quarter and has exceeded $33 trillion for the first time in history. By 2030, this figure could reach $50 trillion. even with the recent bipartisan agreement to cut costs.
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The Treasury market is one of the most popular in the world because it determines the cost of borrowing within the U.S. government debt, with about $750 billion changing hands every day in August, according to Sifma data. Excessive bets from hedge funds can “break” the fragile market balance.
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The reference rate is commonly used by hedge funds that employ relative value strategies involving a long position in the spot market and a short position in the futures market, funded through repurchase agreements.
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This quarter alone, the Ministry of Finance auctioned bonds worth $1 trillion. Meanwhile, borrowing costs have risen sharply over the past year and a half as the Fed wages an aggressive campaign to tighten monetary policy. But the sharp increase in the supply of new US debt is not the only problem.
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Leverage in futures has now increased: 70 times for 5-year
Treasuries and 50 times for 10-year bonds. This is slightly lower than before the COVID-19 pandemic, but if investors do not receive high enough real interest rates, they will simply get rid of these securities.
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So if the market now takes the risk of going against highly leveraged futures investors, a reduction in leveraged
Treasuries positions will trigger a spontaneous sell-off in the market.
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Are you ready to sell American debt?
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Profits to y’all!