By Davide Barbuscia
The trades - typically the domain of macro hedge funds with relative value strategies - consist of selling a futures contract, buying Treasuries deliverable into that contract with repurchase agreement funding, and delivering them at contract expiry. Separately, in a Sept. 8 note that looked among other things at hedge funds' Treasury exposures, Fed economists said there was a risk of a rapid unwind of basis trade positions in case of higher repo funding costs.
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Fed: November rate hike is 'still in play,' strategist saysAugust's Consumer Price Index (CPI) print comes out this Wednesday, ahead of the Fed's September meeting next week. Comerica Wealth Management Chief Investment Officer John Lynch shares his thoughts on the Fed's path for interest rates based on inflation trends, forecasting a 50 basis point hike in the coming months, as well as what markets are expecting. 'The market discourse now is the Fed's done or close to done, and my message to investors is that the market is not done because for several reasons on the 10-year Treasury with market interest rates rising,' Lynch explains. Lynch notes how investors should position their portfolios on various Fed forecasts.
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