Large Short Positions in Treasuries Threaten to Spark Market Turmoil, Analysts Warn
-
U.S. asset managers have built up large short positions in Treasury futures, similar to positions that caused turmoil in March 2020. This poses risks if an event forces sudden selling.
-
The Bank for International Settlements warns the $600B in net short Treasury futures positions could spark "margin spirals" and market disruption.
-
In March 2020, pandemic sparked forced selling of Treasurys, spiking yields. A potential government shutdown could do the same.
-
If traders must suddenly sell Treasurys to cover margin calls, demand could evaporate, causing yields to spike.
-
Heavy net short positions could spark dislocation and sharp yield rises, especially if unexpected events force higher margin requirements.
![](https://www.investopedia.com/thmb/OOOJ6OKlseEEivUoky7JJX982Lw=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/INV_USTreasuryBuilding_GettyImages-1434996940-2bb449b4575a4364b0e75fb315beb41c.jpg)