Hedge funds wary of betting on rates

Managers cite 2013 fixed-income rout as reason for caution

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Before Ben Bernanke’s now-famous warning that the US Federal Reserve might rein in its bond-buying programme last May, hedge funds were among those betting on continued low interest rates. The Fed chief’s comments sparked a mass U-turn and, as a side-effect, revealed a new reality of the fixed-income market – burdened by new rules on capital and leverage, dealers were no longer willing to buy up and sit on unwanted risk positions, with the result that liquidity dropped and p