Analysts, experts and investors argue that the Fed’s interventions in the Treasury market in September 2019 and March 2020, among others, have led to a belief that the Fed will intervene in any instance of extreme market instability, implicitly backstopping speculative trading.
“I do think moral hazard is very real here,” says Morgan Ricks, a professor at Vanderbilt Law School, where he specialises in financial regulation. “So I don’t think it’s unreasonable to think that the Fed’s implicit backstop of this trade is encouraging more of the trade to happen.”
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Because Treasuries are considered the highest quality collateral, the prime brokerage divisions of major Wall Street banks are happy to lend against them, often at their full face value rather than a slight discount. In the repo market — short-term lending that facilitates a lot of Treasury trading — hedge funds need to post only small amounts of cash against their credit lines, sometimes levering up by more than 100 times.
This is all starting to sound very familiar, and alarming.
They have worked for the likes of Nike, Vodafone, Sky, Disney and Pearsons, won awards from Promax, BAFTAs, the Appys and The Drum. Spoken at The Waldorf and Southampton University - despite swearing like a sailor. Available for hire to draw pretty curves and code clever things.
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