US inflation market divided on huge 30-year Tips short
A big short position in 30-year Treasury inflation protected securities backfired at the end of June. Traders say the strategy – driven by the end of the second round of quantitative easing – made some sense, but the size of the bet didn’t. Mark Pengelly reports
Inflation derivatives markets are no longer a land of extremes. In 2010, market participants fretted about two distinct but equally worrying scenarios – deflation on one hand, and runaway inflation on the other. Among other things, those fears sparked massive interest in zero-coupon inflation caps and floors, including several large trades between California-based asset manager Pimco and Toronto-based insurer Fairfax Financial (Risk November 2010, pages 42-44).
Since the US Federal Reserve
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