eth hacker :: collectooor :: security research @nascent

Attempting to ELI5 the bond market situation

- there’s something called the “basis trade” that hedge funds are in on where they are betting on micro differences in the price of bonds and their prices on the futures market
- tariffs crashed the stock market which in turn crashed this trade and the hedge funds need to sell their bonds to make up for losses
- because prices are dropping fast it could cause people to panic sell and cause many billions in losses
- one option is for the federal reserve to stabilize prices by buying lots of bonds
- he doesn’t want to because we’re already in historic debt and this would be taking on even more debt