The great unwind: Buy-side fears impact of market-making constraints

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At the start of May, as prices for US agency bonds reached what would later prove to be a peak, one New York-based hedge fund decided to sell its portfolio of roughly $100 million in AAA-rated mortgage-backed securities. The fund’s senior trader expected to be out of the position in a day, or even less. If it had gone to plan, it would have been beautifully timed, but it didn’t go to plan.

“You’re talking about AAA agencies – OK, with some callable features –

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