The Hedge Funds’ Trillion Dollar Bet: What Happens to You When the Music Stops and the Party Ends
The leveraged basis trade of bonds of the G7 nations: US Treasuries, German Bunds, Japanese JGBs, British Gilts, French OATs. What happens to you when the music stops and the party ends? A simple explanation of the leveraged basis trade of G7 debt (US Treasuries, German Bunds, Japanese JGBs, British Gilts, French OATs. And its impact on the 80% of the K-shaped economy that is you and me. Introduction The financial markets and global economies are still not yet in crisis mode. Despite grossly overvalued US stocks, bond yields not seen since the 2008 financial crisis, US national debt at $40 trillion, oil prices over $100, inflation, the war in Iran, corporate bankruptcies, job losses, AI infrastructure build-up debt and so on. But this week, a new issue cropped up that could trigger a financial Apocalypse. The hedge fund money machine hiding inside the bond market Imagine a casino game where the house edge is tiny — say, half a perc...