Tariffs Turbocharge Collapse of Favored Hedge-Fund Rates Bet

The upheaval from President Donald Trump’s tariffs is accelerating the collapse of a popular hedge-fund bet that Treasuries would perform better than interest-rate swaps.

The trade had been losing momentum since February, in part on waning expectations for an imminent move by the Trump administration to loosen bank regulations and allow lenders to keep more Treasuries on their balance sheets. Signs of such a policy shift would have boosted Treasuries relative to rate swaps, which are derivative contracts through which two sides agree to exchange interest payments.