Why do hedge funds gain a political influence? star-news.press/wp

The growing bonds of hedge funds have threw merchants in the unlikely – unlikely international financial agency.

Their short and long US Treasury bonds reached $ 3.8 trillion in March, more than twice since 2022, According to To the Office of Financial Research (OFR), which represents about 13 % of the total market.

The Treasury Market is the basis for the global financial system and confirms each other financial market. The organizers and central banks highlighting the hedge boxes that undertake the high -voltage sites.

However, with a new ability to provide or drown bond markets, hedge funds have gained intentional or not, also affecting political influence. The last cases of rapid supply increased financial shocks, but this chaos is exactly that forced leaders to retract risk policies.

“I used to think that if there is a reincarnation, I wanted to return as a president or the Pope or as a bombarder.” But now, I would like to return to the bond market. You can intimidate everyone, ”

So, are the latest hedge funds in Wall Street alertness, or destabilizing the dangerous market?

How was the hedge boxes drunk on the treasury bonds

The key to understanding the political influence box boxes boxes is an understanding of the reason for their flow in the bond markets to start.

The Federal Reserve quickly started walking for long distances Rates In 2022, he climbed from zero to 5.5 % in less than a year-the highest level in more than two decades. The high costs of borrowing caused significant fluctuations in the cabinet prices.

These fluctuations expanded the “basic” gap between the treasury in the money market and the contract contracts on this bond. In theory, the two prices must be closely tracked, because the future contract contract is just a promise to submit bonds later.

Expanding the volatile volatility of the foundation gap because investors use future treasury contracts to hedge or speculate. This increasing demand can pay futures prices outside the line of cash bonds.

Hedge boxes arbitration of this small difference, known as basic trading.

They use the ribau markets to borrow huge amounts of money to buy “cheaper” bonds, with the sale of future “expensive” futures, thus converting small profits into large factors. It represents the 10 most important hedges of 40 % of the total borrowing on the ribo and have a financial lever rate from 18 to 1, according to Offers as of March 2024.

The “basis trading” can strengthen the US Treasury market by increasing liquidity and discovering prices while reducing the cost of government borrowing “, Beit M. Hamak, President and CEO of the Federal Reserve Bank in Cleveland, He said In February.

“These deals provide liquidity at calm times, but they are cracked at loud times,” Richard Burner, a financial professor at New York University and first office manager, told the Financial Times in April.

“You can intimidate everyone”

The chaos, which followed, forced the rapid collapse of these professions, political leaders, to spin on very controversial economic policies.

When President Donald Trump announced the mutual definitions of US imports on April 2, the bond market did not take economic uncertainty.

He concluded that this may get worse for the already high inflation and maintains the high interest rates for a longer period, investors threw their bonds. At the same time, the demand for futures contracts for the Treasury has become stronger, which has increased its price.

This basis has expanded the hedge box sites, losses on both the bonds they hold, and the futures that were shortened. Since their trading was a crane by benefiting from them, margin calls were important. Once the lenders demand more guarantees to calculate the lost value in their locations, the money was forced to relax their deals. Treasury bonds decreased for 10 years by 8 % in one week.

“The hedge box is likely to inflate this step,” JPMorgan analysts books In April.

Within days of their first appearance, Trump suddenly announced a temporary stop for 90 days on the customs tariff, admitting that the bond market was “somewhat increasing.”

Similar episodes of vigilance occurred in the bond market in the UK market (government bonds), where hedge funds represent about 60 % of trading sizes.

The most famous case was the case of former Prime Minister Liz Toss. In 2022, after the beauty revealed the non -funded tax cuts and the promises of major spending. This was followed by the sale of a doctrine.

Less than a week later, the Bank of England announced the purchases of the gilded emergency to achieve stability in the market, a warning: “It was a job defect in this market to continue or exacerbate, there will be material risks to financial stability in the UK.” Just weeks after this intervention, the beauty resigned – after he only served 49 days as prime minister.

The markets of a doctrine emerged to work again last month, after a moment of risks in Parliament. Treasury Advisor Rachel Reeves seemed to cry behind Prime Minister Kiir Starmer, who was fully supported. The amazing return for 10 years immediately jumped with 22 basis points-the largest increase in one day since the aeronal disorder-where investors were afraid that Reeves will be financially disciplined on the threshold of losing its role in overseeing the financial affairs of the government.

Within one day, Starmer reaffirmed his support to Rifz, declaring that she “will be a very long consultant to come.” At this stage, the revenues of the doctrine declined.

“The bond market has saved Rachel Reeves from Kiir Starmer,” books NewStatesman’s Dunn will later on that day.

Make bad times worse

Describing how he felt watched the hedge boxes, she acquired its boxes in response to the Trump tariff, Bill Campbell, the wallet manager at Doubleline Asset Manager, He said Reuters: “I have begun to get the warning signs that there is possible pressure in the system, and it has continued, and then begins to be at risk of the biggest things.”

The outbreak of Covid-19 gave a glimpse of the speed of the “largest things” that can be launched from-a lesson that chases the organizers.

In the three years preceding the year 2022, hedge funds have almost doubled their treasury, corresponding to an average rate of 1.75 %.

When the epidemic hit, global investors wanted to panic money, quickly. Instead of purchasing safe locker bonds, investors sold it to raise liquidity.

Again, the foundation against hedge box positions has expanded. By throwing the cabinet, they worsened. By mid -March, the Federal Reserve forced the purchase of more than $ 1.6 trillion in the treasury within weeks to install the market.

The IMF recently wrote, the hedge funds are at risk of circulation. a report On global financial stability. The funds were thrown more than half a trillion dollars in the treasury by the end of 2020.

Indirect effects

I love them or hate them, the location of the cabinet does not slow down. UK Purchase 48.7 billion dollars in treasury bonds in June-the largest purchase of any country-with the maintenance of its rank as the second largest foreign holder. The United Kingdom is a nursery country, and this means that it is used by the hedge funds for custody services, such as the Kayman Islands and the Bahamas.

While the hedge funds may have led to the dismantling of the non -funded tax effects of TRSS, or the comprehensive Trump tariff, the organizers argue that a handful of the hedge boxes with profit, which bear the risks that cannot be trusted with the financial basis of the financial system.

Last month, the Financial Stability Council (FSB) The name Organizers all over the Group of Twenty have to consider determining the limits of the leverage of financial companies other than banks in government bond markets.

“The financial system today is very interconnected so that it is not optimistic about the potential heterogeneous impacts of the non -banking sector,” Hamak said at the Federal Reserve in April. “No one should remember 2008 and run on organized investment vehicles, AIG, and Lehman Brothers think that the transfer of risky assets to non -banks is any guarantee of financial stability.”