Sovereign Bond Markets Face Higher Volatility Due to Increased Hedge Fund Participation
Dow Jones
Aug 26
1510 GMT - Hedge funds' participation in government bond markets has increased notably in recent years, raising the risk of more volatility in the markets, Capital Economics' Joe Maher says in a note. Major central banks have stepped back from buying government bonds, and pension funds' demand for sovereign bonds has declined, leading to greater participation by more price-sensitive investors, Maher says. "We think the presence of more speculative buyers such as hedge funds in these markets have made them more prone to spikes in volatility." U.S. 30-year Treasury yields last week hit 5.3371%, their highest since 2007, LSEG data show.
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