Odd Lots What We Learned About Treasuries on the Night of April 8
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Apr 28, 2025 
Ira Jersey, Chief US interest rate strategist at Bloomberg Intelligence, shares his expertise on the bond market's latest turmoil. He explains how typical safe havens like US Treasuries have faltered, especially following President Trump's 'Liberation Day'. The conversation dives into the spike in yields during April 8-9, revealing unexpected selling and liquidity challenges. Jersey also discusses the implications of shifting foreign ownership patterns and how these dynamics impact U.S. fiscal policy and global investor confidence.
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Swap Spreads, Not Basis Trade
- The basis trade initially suspected to cause Treasury market volatility showed no significant trading anomalies in futures volumes or prices.
- The real volatility was driven by the swap spread market unwinding, reflecting leverage in interest rate swap positions.
Why Swap Spreads Stay Negative
- Regulatory constraints limit banks' ability to own treasuries, keeping swap spreads negative.
- Insurance companies use interest rate swaps to manage duration gaps because buying treasuries outright is less balance sheet efficient.
Liquidity Constraints Amplified Volatility
- Joe Weisenthal stayed up late watching yield spikes on April 9th that reflected very low liquidity hours in Asia.
- Dealer constraints and regulatory limits reduced their capacity to absorb selling, amplifying price moves.