London, Uk, May 22nd, 2025, FinanceWire
Today, Northern Markets, a leading financial technology firm and multi-asset access, reacted to the latest selloff in the US Treasury market, which has been compared to the COVID-19 financial panic phase. The increase in yields and reduction in liquidity has caused a revival of interest and focus on institutional risk management. Head of Investor Relations, Jamie Mor, at the Northern Markets noted that the present environment reveals that risk enhancement in core markets through leveraged strategies and changing monetary forecasts leads to volatility.
The Treasury market, which is roughly $29 trillion, experienced one of the most turbulent sessions in the past twenty years. Benchmark 10-year yields jumped 17 basis points in one day and rose within a 35 basis point volatile zone. The selling extended into mid-week, with the benchmark yields reaching 4.425%, indicating to some experts that a depth of market stress caused by concerns over inflation and margin selling had arrived.
Deleveraging and Arbitrage Unwind Drive Market Dislocation
Fairly central to the latest disorder is the basis trade, a highly leveraged arbitrage that involves simultaneous long cash and short-futures Treasury positions. Bond prices declined to a new low, and thus, institutional investors, especially hedge funds, received margin calls. To meet their liquidity demands, many had to sell the treasuries, thus increasing the pressure on the price.
“This is not a technical repositioning; it is the market, heaping stress upon stress at once,” Mor stated. The basis trade is extremely efficient otherwise, although these results arise when volatility and leverage meet. But now, because of high interdependency, we are following the result of these trades in a severe environment.”
Northern Markets also stressed that such a selloff has created questions not only about market depth but also about the involvement of regulated institutions in intermediation. With all these and the global credit crunch, which has led to the deterioration of the quality of collaterals used in raising funds, the amount that banks can borrow to support liquidity in the fixed-income market has reduced.
Market Signals Shift Toward Inflation and Policy Constraints
Though declining margins were the principal reason for the bond dump, investors may be shifting their perceptions regarding macroeconomic issues. Some participants suggested that because of new inflation worries and, specifically, President Trump’s increasing tariffs, the Federal Reserve may not be able to deliver more easing for interest rates in the near term.
The future of Treasuries as a defensive play is under threat, according to Mor. Indeed, investors are adjusting their positioning in anticipation of the fact that inflation may be structurally high, and this will force central banks to tighten policy,
Northern Markets also stressed the need for institutional investors to adapt to the market dynamics, which they should achieve through good risk management and access to a wide range of assets. The firm continues to assist its clients in managing volatility by employing long-term investment strategies based on clear infrastructure and investments in multiple assets.
About Northern Markets
Northern Markets is a global investment platform dedicated to providing diversified access to a wide array of financial instruments, including equities, digital assets, commodities, and more. With a mission to empower investors through innovation, insight, and security, Northern Markets is at the forefront of the changing investment landscape. For more information, users can visit https://northmarkets.io/login/