From Yahoo Finance: 2025-04-09 01:04:00

A Treasury selloff in the U.S. sparked concerns about market fragility, with benchmark yields surging 17 basis points in a day, one of the wildest swings in two decades. Hedge funds selling assets to meet margin calls contributed to the upheaval, reminiscent of the COVID-era “dash for cash.”

The selloff continued, pushing 10-year yields up 16 basis points to over 4.425%. A popular hedge fund arbitrage trading strategy, the basis trade, was unwound, potentially destabilizing markets. Regulators have monitored this trade closely, as its rapid unwinding could reduce bank liquidity in the Treasury market.

Concerns over President Trump’s inflationary tariffs on trade partners and the Federal Reserve’s ability to cut rates due to slowing growth may have also contributed to the selloff. Demand for U.S. assets has waned amid market volatility, prompting investors to seek alternatives to Treasuries.

Analysts noted a sharp drop in swap spreads and tighter yield differentials between Treasuries and swaps, signaling heavy foreign real money selling. Hedge funds positioned for wider swap spreads likely had to unwind, exacerbating the Treasury selloff. The selloff culminated in a “light dash-for-cash,” hinting at demand destruction for Treasuries.

Read more: Analysis-Sharp US bond selloff revives flashbacks of COVID-era ‘dash-for-cash’