Author: Nell Mackenzie and Naomi Rovnicek
London (Reuters) -Hedge funds have slipped into the betting debts on government bonds in the UK, which increases the potential of instability in the GILTS market, which means that the cost of loans in Britain, including mortgages, investors and sources of Hedge funds, states.
Bank of England chief Andrew Bailey said in February that non -banking institutions such as hedge funds “can” spread liquidity stress in the basic British financial markets, especially on a gilded market “.
This is partly due to their activities on short -term rental markets described to Reuters more than a dozen resources – including portfolio managers leading Hedge funds and former central banker.
Hedge funds borrow to finance various shops based on ten -year -old pigs. Data from the Tradeweb electronic trading platform shows that in January and February they were 60% of the volume of trading in the United Kingdom, of approximately 53% at the end of 2023 and at least five years.
“The British market rates have sometimes traded quite chaotically, because the large securing funds are pushing them around, and sometimes there are not so much real money in relation to security funds,” said David Aspell, head of portfolio to $ 1.7 billion macro Hedge funds Mount Lucas Management, which has reversed and weighed trading positions this year.
With about £ 2.5 trillion ($ 3.2 trillion), the GILTS market is a dwarf of a $ 28 trillion market for US treasury bonds.
Volatility on bond markets affects the costs of loans of government and credit conditions for households and businesses.
Key shops
The participation of Hedge funds in the European bond markets has grown in recent years, and although their location has sometimes been worried, some officials said they were helping to provide liquidity.
The United Kingdom regulars, however, look at how Hedge funds use repo markets to place in GILTS. Repos – abbreviation for redemption agreements – are a source of funding that can be essential at the time of market stress.
Hedge funds that use repo and are active in gilded markets include Brevan Howard, Capula Investment Management, Millennium Management and Rokos Capital Management, which trade with many different classes of financial assets under one roof, Reuters said.
Capula, Brevan Howard, Millennium and Rokos, who supervised the combined $ 150 billion, refused to express themselves.
Hedge funds are currently using repo financing for three different bets against GILTS, seven sources said.
One uses 10 -year -old gilded prices compared to their futures derivatives. Speculators buy futures currently trading with a bonus, and “short” cash bonds – often call the abbreviation of basic trade. When the investor shortens, they borrow securities for sale and hope to buy them later cheaper.
