Trump tariffs turn swap spreads into ‘pain trade’
Hedge funds bet big on Treasuries to outperform swaps. The opposite happened.
A bet on the relative performance of US interest rate swaps versus Treasuries has turned into a ‘pain trade’ for hedge funds as tariff-driven fears cause bond yields to surge.
Hedge funds piled into what some dubbed the ‘trade of the year’ after the US presidential election in November on the expectation that the Trump administration would direct regulators to exempt Treasuries from the supplementary leverage ratio (SLR). The idea was that bond valuations would outpace swap equivalents if bank
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