Surge in hedge fund short bets against US Treasuries triggers BoE alert

Financial Policy Committee warning

Hedge funds’ net short positions against US Treasuries futures have reached a new high of $1trn, prompting the Bank of England to warn financial institutions to standby for severe stresses in the financial system if these positions are unwound.

At the Financial Policy Committee's (FPC) September meeting, the committee noted hedge fund net short positions in US Treasuries futures had continued to rise since the June Financial Stability Report (FSR). The committee said these positions were higher than the previous peak of around $875bn in 2019, while other asset managers have continued to build long positions in Treasuries futures. The FPC issued the warning as it highlighted the vulnerabilities that remain in the financial markets, accentuated by the stock market sell-off in August. Central bank body warns hedge fund bets ...