JPMorgan Has New Theory About What Really Caused the Flash Rally
- `Data suggest the cash market broke first,' analyst says
- Vanguard Treasuries trader among those using futures more now
JPMorgan's New Flash-Rally Theory Points to Cash Market
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Some 16 months after the “flash rally” in U.S. Treasuries blindsided Wall Street traders, little about what exactly went wrong has been resolved. The most common, albeit tenuous, explanation is that the futures market seized up that morning, creating a spillover effect into cash bonds that led to a frenetic 12-minute spike in prices.
JPMorgan Chase & Co. analysts are now advancing a new theory, one they contend is a key to how to trade most effectively in today’s volatile Treasuries market. The problems on Oct. 15, 2014, actually began in the cash market, the analysts led by Joshua Younger said in a note this week.