The often mentioned reason behind the sell-off of U.S. Treasuries is the closing of “basis trades”

Odaily News Felipe Villarroel, portfolio management partner at TwentyFour Asset Management, said in a note that after speaking with government bond trading desks, TwentyFour did not find a clear answer to what caused the sell-off in Treasuries. "The most common reason was the unwinding of 'basis trades,'" he explained, which involves traders having to sell Treasuries to meet margin calls on leveraged positions. The purpose of leveraged positions is to arbitrage the tiny price spreads between Treasuries and Treasury futures or interest rate swaps. The huge volumes involved set off a chain reaction, and suddenly many bonds needed a new home, and buyers were too nervous to catch the falling knife in the most volatile week in recent memory. (Jinshi)