When Trump’s tariff announcements triggered a sell-off in global financial markets, investors were caught off guard by an almost 50 basis point jump in long-dated 30-year US treasury yields.
Although there was some concern that this marked a shift in foreign demand for US government bonds, the move was more likely driven by a sudden unwinding of levered positions by certain trading firms.
This is according to strategists at State Street Global Advisors who pointed to the fact that long-dated US treasury rates rose more than swap rates or futures rates during the volatility.
“This may indicate that investors were selling cash bonds and receiving swaps or covering short futures positions in order to unwind these trades,” they said.
This drawdown in US treasuries “is not something new to the market” the strategists added, drawing comparison to similar moves during the Covid-19 sell off of March 2020 and the…
