Hedge funds seen facing heavy losses amid wrong-way Treasury bets ahead of Fed tapering, traders say

MarketWatch/Vivien Lou Chen/10-29-2021

graphic image of stock market charts thru the looking glass“Some hedge funds are likely to be facing substantial losses as the result of a steady narrowing in the differential between yields for long-dated U.S. government debt and shorter-dated ones, traders said on Friday.”

USAGOLD note: The problem is excessive leverage. Either way the rabbit (the Fed) jumps tomorrow (or even if it doesn’t jump at all), there is trouble building in the system and it is difficult to know the extent of the consequences. Who would have guessed two weeks ago that we would be back to worrying about the narrowing yield curve? MarketWatch describes that narrowing as “a harbinger of potential economic trouble.”

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