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The swift spike in US Treasury yields has caught some of America's largest hedge funds by surprise, and the severe losses they're suffering are suddenly threatening to spill over into the banking system.
These "basis trade" players are highly levered in what they considered very safe, very predictable assets.
But bond yields jumped so quickly in response to the Trump tariff tempest, that losses -- highly levered ones -- ensued. Now these firms risk defaulting on the banks that provided the leverage for these trades.
Could these create another credit system crisis like 2008?
It's possible, warns portfolio manager Lance Roberts. It by no means inevitable, but the risk is worth watching very closely.
As a result, Lance's firm has reduced its equity exposure and pulled in the duration of its bond sleeve.
Lance shares all the details in this week's Market Recap.
#basistrade #recession #tariffs
0:00 - Client Reactions to Volatility
3:12 - Basis Trade Blowing Up
15:32 - Potential Credit Event Risk
20:22 - Why 4.5% Yields Are Critical
27:50 - Lance's Bond Portfolio Adjustments
31:40 - Equity Market Technical Analysis
38:52 - Weekly Sell Signal and Equity Exposure Cuts
48:02 - Short Position Strategy
53:23 - Gold Market Dynamics
59:07 - Recession Risk Indicators
1:01:36 - Tax Deadline Actions
1:03:01 - Consumer Tapping Out
1:07:17 - Earnings Estimates Outlook
1:11:12 - 2022 Market Playbook
1:15:21 - Layoff Preparedness
1:22:20 - Retirement Planning Essentials
1:27:49 - Financial Planning Pitfalls
1:32:04 - Myth of Missing Best Market Days
1:36:06 - Rant: Dealing With Losses
1:46:33 - Portfolio Trades Summary
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