The Chinese-Hedging-Gone-Awry Theory of Treasuries

Posted by

Today must be a risk-on day, my entire screen isn’t crimson all at once and the bonds are taking a breather.

I got a bunch of feedback from my recent post on the bull market in bonds the other day, and much of it was of the disbelief variety.  Anyway, from regular Peter F in NYC comes this interesting bit of speculation on what some in the The Business think may have actually gone on over the last month to propel government paper to its recent peak:

Just putting it out there, responses encouraged:

“Hi, I was sitting out here in the hamptons thinking about the long bond and this nasty rumor about china taking a $430BB loss.  At first I dismissed it, but then I actually starting using my rose’ soaked brain for the first time since August began.  Here is my thinking.  Everyone is assuming China lost money investing in Treasuries, but how can that be with the treasury market crashing to all time low yields, makes no sense, right?

Here is my take.

Beginning this year there was serious money being made(by me and others) shorting the bonds.  Then it stopped and now we have the mass parabolic bond spike we are seeing.  It looks to me like this guy in China, thinking how smart it would be to hedge his position, might have, using derivitives and futures, shorted the hell out of the US Bonds near the end of last year into this year.  Now a $430BB loss seems like a lot, but what happens if you have 2.5 TT in bonds to hedge.  Well a 17% loss would not be out of the question, especially as you tried to cover causing a massive spike in the bonds you were short.

I wanted to run this by you, as the market, which went from really well supplied earlier in the year, to a massive spike higher, seems to be telling a story of someone in trouble and caught the wrong way.  Who can be that big……”

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web
  1. sex commented on Sep 18

    … [Trackback]

    […] Find More Info here to that Topic: thereformedbroker.com/2010/09/01/the-chinese-hedging-gone-awry-theory-of-treasuries/ […]

  2. bitcoin era review 2020 commented on Sep 29

    … [Trackback]

    […] Find More Info here on that Topic: thereformedbroker.com/2010/09/01/the-chinese-hedging-gone-awry-theory-of-treasuries/ […]

  3. immediate edge commented on Oct 04

    … [Trackback]

    […] Read More Information here on that Topic: thereformedbroker.com/2010/09/01/the-chinese-hedging-gone-awry-theory-of-treasuries/ […]

  4. Mossberg Guns for Sale commented on Oct 14

    … [Trackback]

    […] Find More on to that Topic: thereformedbroker.com/2010/09/01/the-chinese-hedging-gone-awry-theory-of-treasuries/ […]

  5. Glock firearms for sale commented on Oct 14

    … [Trackback]

    […] Info on that Topic: thereformedbroker.com/2010/09/01/the-chinese-hedging-gone-awry-theory-of-treasuries/ […]

  6. 토토사이트 commented on Oct 16

    … [Trackback]

    […] Find More on on that Topic: thereformedbroker.com/2010/09/01/the-chinese-hedging-gone-awry-theory-of-treasuries/ […]

  7. Harold Jahn Prosperity Investments commented on Nov 04

    … [Trackback]

    […] Read More to that Topic: thereformedbroker.com/2010/09/01/the-chinese-hedging-gone-awry-theory-of-treasuries/ […]

  8. Automate Performance Testing commented on Nov 12

    … [Trackback]

    […] There you can find 31594 additional Info on that Topic: thereformedbroker.com/2010/09/01/the-chinese-hedging-gone-awry-theory-of-treasuries/ […]

  9. td easyweb commented on Nov 26

    … [Trackback]

    […] Information to that Topic: thereformedbroker.com/2010/09/01/the-chinese-hedging-gone-awry-theory-of-treasuries/ […]

  10. รับทำเว็บไซต์ commented on Nov 30

    … [Trackback]

    […] Read More Info here to that Topic: thereformedbroker.com/2010/09/01/the-chinese-hedging-gone-awry-theory-of-treasuries/ […]

  11. Sexy video commented on Dec 28

    … [Trackback]

    […] Read More Info here on that Topic: thereformedbroker.com/2010/09/01/the-chinese-hedging-gone-awry-theory-of-treasuries/ […]

  12. Kampala International University commented on Dec 30

    … [Trackback]

    […] Here you will find 52051 more Info on that Topic: thereformedbroker.com/2010/09/01/the-chinese-hedging-gone-awry-theory-of-treasuries/ […]

  13. replica bell and ross commented on Jan 14

    … [Trackback]

    […] Information on that Topic: thereformedbroker.com/2010/09/01/the-chinese-hedging-gone-awry-theory-of-treasuries/ […]

HowIInvestMyMoney