What is behind the sale of the cabinet?

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With stock markets crashed in the trade war, Scott Bessin, US Treasury Secretary, tried to calm the nerves of investors at the end of last week. “Most Americans in 401 (K) (retirement plan) have the so -called account of 60/40 … They (only) decrease 5, 6 percent throughout the year”, is Advertise on TV.

Or, in simple English, given that investment managers usually put 40 percent of the wallet in fixed income, the decrease in stock prices must be partially compensated by the high prices of bonds, since they usually move in opposite two directions – at least according to financial textbooks.

It is no longer, but. Last week, bond prices have already increased with shares drops, apparently due to the high recession fears. But this week they have Decline Amid signs of weak demand at the locker auction.

This is very unusual, like market analysts like Larry McDonald Ashir: During the stock market accidents in 2008, 2001, 1997 or 1987, bond prices increased. In fact, this double strike was only seen recently during the pancake of Covid-19.

If the prices of bonds persist in addition to stock prices, they ask at least three questions: Can the market tolerate this pain? Will the Federal Reserve intervene, as it did in 2020? What drives the sale of the bond market?

We may not get answers to the first two questions for several days. But evidence about the third number is many.

One (clear) possibility is the macroeconomic economy: investors are worried about high inflation, due to definitions. The other is that some investment funds may receive their most liquid assets to meet marginal calls.

Although the other-worse interpretation-is that the fluctuation is broken because the hedge boxes are forced to relax on the so-called “Basic deals”. This is a strategy by the bow that involves making “crane stakes, sometimes up to 100 times, with the aim of taking advantage of the rapprochement between the price of futures and the price of bonds”, such as Torsten Slok from Apollo The private capital group places it.

In recent years, these deals have exploded – albeit on a difficult scale. In fact, the explosion is very noticeable Three of the five best sources As for the request of non-American cabinet, Luxembourg, Kayman and London Islands-hedge fund centers.

the International Monetary Fund (GU) recently estimated that these deals Under one dollar, While Bloomberg’s analysis indicates that the hedge boxes have 7 percent of all the treasury, it seems more than the agent banks, and Sharp increase. “It is $ 800 billion and” it is an important part of 2TN of $ 2 at primary mediation balances. “

Either way, as bond markets stumble, it seems likely that some money is forced to relax on professions, creating an effect similar to that one It was seen in 2020. What makes this worse is that as stars in the market, such as the founder of Bridge, Ray Galio Issuing terrible warnings about the increasing American debts, and gossip about virtual risks in the supposed future rises as well.

The White House insists that this is ridiculous. But merchants know that when Trump was “just” a businessman, he stumbled again and again on his debts. Some wild political ideas that are now floating around the White House include supposed Debt bodiesand or Semi -restructuring. Once unlimited Scenarios Imagine – and price.

Then there is an elephant in the bond room: the risk of the trade war between the United States of Chinese into a capital war, which prompted Beijing (currently the second largest holder of the Treasury) to run from the dollar assets.

There is little evidence of this – so far. But Beijing has moved amazing money this week: I left Renminbi It weakens against the dollar, and increases the possibility of currency wars. This makes it easy to imagine other scenarios. “Beware of a trade war to a financial war.”

For this reason, Ed Yardini, a macro -strategic expert, said, said, Clients The Trump team is now “plays with a liquid nitro” with the cabinet. Bessnt’s sedative words may intervene for investors, or the Federal Reserve-or Trump’s announcement of a 90-day stop on mutual definitions, which seems to have occurred in response to the falling bond market (confirms that vigilance bonds still control the cavity), will calm the nerves of investors. But until then, Yardini’s analogy is correct; We can slip towards a financial crisis.

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