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Enormous De-Leveraging in Bond Market Smacks of Margin Calls

  • Futures see $150 billion 10-year Treasuries equivalent purged
  • Hedge funds suffer worst one day performance since 2008
A statue of Albert Gallatin, former U.S. Treasury secretary, stands outside the U.S. Treasury building in Washington, D.C., U.S., on Monday, July 16, 2018. The House this week plans to consider a minibus spending bill that combines legislation funding the Treasury, Internal Revenue Service (IRS), and the Securities and Exchange Commission (SEC) with another bill keeping the Interior Department and Environmental Protection Agency (EPA) running.
Photographer: Andrew Harrer/Bloomberg
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A sell-off in the supposedly safe government bond market this week has unnerved investors looking for a haven amid the risk-asset storm. A slump in open positions in bond futures suggests a rush to meet margin calls may be partly responsible.

Calculations by Bloomberg show bond futures positions equivalent to $150 billion in 10-year Treasuries were sold Friday through Tuesday, with total outstanding contracts dropping to the lowest since 2018. This week saw a gauge of global stocks slump around 11% amid the worsening coronavirus outbreak, while an equivalent index of government bonds tumbled over 3%, wiping out gains from earlier in the month.