Hedge funds have dumped over $100 billion in Treasurys this year, accelerating the bond market’s vicious sell-off

Us cash
In this photo illustration one hundred US dollar banknotes are seen on display. Igor Golovniov/SOPA Images/LightRocket via Getty Images
  • Hedge funds have sold over $100 billion in Treasurys since January, becoming big contributors to the bond-market slide, Bloomberg reported.
  • Investors in the Cayman Islands have been the biggest net sellers of US sovereign debt.
  • The sell-off by hedge funds began before the latest round of US government fiscal stimulus.
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Hedge funds have played an instrumental role in this year’s rout in the US bond market by selling off more than $100 billion in Treasurys, according to a Bloomberg report.

Investors in the Cayman Islands, a major financial center and a known domicile for leveraged accounts, have been the biggest net sellers of US government debt, offloading $62 billion of sovereign bonds in February and dumping $49 billion in January, with Bloomberg citing data from the Treasury Department.

The sell-off began after the early January Senate run-off elections that were won by two Democrats. The victories gave that party a 51-vote majority in the upper house of Congress, including Vice President Kamala Harris, paving the way for a large new round of government fiscal spending. In March, President Joe Biden signed into law a $1.9 trillion stimulus package that passed 51-50 in the Senate.

The rollout of COVID-19 vaccines also contributed to investors deciding to exit bonds. As bonds sold off, rising yields prompted a return of convexity-type hedging flows, Bloomberg reported.

The bond market sell-off this year drove the widely watched 10-year Treasury yield above 1.7% for the first time since early 2020. The yield has since pulled back to around 1.58%.