EU bond-futures basis flip spells curtains for netting
Alignment with US positions brings higher balance sheet usage, while low returns also a turn-off say traders
There has long been a cross-Atlantic balance to the government bond versus futures basis trade, with the US version requiring selling futures and the European version doing the opposite.
But dealers say the recent cheapening of government bonds, driven by the European Central Bank’s (ECB) ongoing quantitative tightening programme, has reversed the positioning of the EU government bond futures basis trade, making it directionally the same way round as the US.
For hedge funds running both versions
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