Big Short Builds in U.S. Bonds on Wariness of Convexity Trigger

(Bloomberg) — Bond investors are piling back into short positions, motivated not only by the specter of inflation but also by the risk that yields are approaching a level that will unleash a wave of new selling by convexity hedgers.Most Read from BloombergThat level is around 1.60% in the U.S. 10-year Treasury yield, less than five basis points from its current mark and the highest since early June, according to Brean Capital’s head of fixed income strategy, Scott Buchta. It’s the midpoint of “a key threshold” in the range of 1.40% to 1.80%, an area “most critical from a convexity hedging point of view.”Convexity hedging involves shedding U.S. interest-rate risk to protect the value of mortgage-backed securities as yields rise, slowing expected …

The post Big Short Builds in U.S. Bonds on Wariness of Convexity Trigger appeared first on Populist Press 2021 ©.

Be social. Share!