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ASR in FT Unhedged: ‘A whiff of bad inflation news’

Ella Rathgeber

14th SEP. 2023

In this morning’s FT article, Robert Armstrong and Ethan Wu discuss August’s CPI report, which was ‘just barely bad enough’, and ‘the big bad basis trade’.

“Since the great financial crisis, people tend to worry when a lot of leverage builds up in any financial market, the way it did in the market for housing finance prior to 2008,”…

“The reason everyone is focused on the basis trade just at present is because there is suddenly a lot of Treasury futures selling going on the market, more even than in the run-up to the 2020 car crash, as can be seen from the chart of the exposure from Ian Harnett and David Bowersof Absolute Strategy Research.”…

“One response to the build-up of leverage in the Treasury market is to wonder why the hell the speculators didn’t learn their lesson the first time. But of course they did learn their lesson: the lesson is that if things get really bad in the Treasury market, the Fed will intervene.”

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