Treasury Arbitrage Traders Can’t Wait for Fed to Start Tapering
- Less buying by central bank means more opportunities to profit
- Morgan Stanley sees two main relative-value hunting grounds
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U.S. government-bond traders can’t wait for the Federal Reserve to stop buying Treasuries. They’re looking forward to the return of trading opportunities that tend to disappear when a central bank is hoovering up $80 billion a month.
Since its purchases of Treasuries stabilized at that rate in June 2020, traders have focused on which notes and bonds the Fed was likely to buy, since owning those could be profitable.