Europe’s Whipsawed Bond Market Puts Hedge Funds in Spotlight
Smoke rises in the distance following an airstrike in Tehran, on March 13.
Photographer: Majid Saeedi/Getty ImagesA burst of volatility in European rates markets, unleashed by war in the Middle East, is reviving a discussion about the role hedge funds play in amplifying the swings.
By some measures, Monday saw some of the choppiest trading since the early days of the pandemic. A key euro interest-rate swap curve inverted, only for the move to reverse within hours. At one point, traders were pricing two European Central Bank hikes this year, while wagers on Bank of England policy flipped from cuts to hikes and back again.