Here’s One More Theory on What’s Causing the Repo Squeeze
- Bets on steeper Treasury curve likely contributed, says Coutts
- Popular 2s10s steepeners are funded in repo market: Higgins
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Investors betting yields on long-term bonds will rise may have helped fuel the recent surge in money market rates, according to Coutts & Company Chief Investment Officer Alan Higgins.
So-called 2s10s steepeners, where investors buy two-year U.S. Treasuries and sell 10-year notes, have become a popular macro trade among banks and some hedge funds, said Higgins. Most of these trades are funded through the repo market.