Treasury Market Arbitrage Trades Beckon as Liquidity Recovers
- Bond market liquidity may start to pick up after summer lull
- Relative value opportunities are ‘compelling,’ JPMorgan says
This article is for subscribers only.
Wall Street is starting to eyeball potential arbitrage trades as the lull of summer in the U.S. comes to an end and market liquidity picks up again.
These kinds of trades involve the buying and selling of similar maturity bonds as yield dispersions normalize across the Treasuries curve. And strategists from JPMorgan Chase & Co. reckon there is a possible opportunity to be seized further out the curve. In their view, bonds maturing in 2046 that are currently off-the-run -- that is, they are not the most liquid major benchmark issue around a particular tenor -- appear relatively cheap right now when compared to recent issues.