Monday, 20 March 2023

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Rokos and Goldman Sachs hit in bond market upheaval

Rokos and Goldman Sachs hit in bond market upheaval

Billionaire trader Chris Rokos and Goldman Sachs are among big-name investors that have been hit hard in the market upheaval following the collapse of Silicon Valley Bank.

Bond prices rocketed in highly volatile trading at the start of this week, when SVB’s demise sparked a flight to safety and led investors to question how much further the US Federal Reserve can lift interest rates. That caught many traders off guard, and collided directly with hedge fund strategies that had profited handsomely in 2022 from betting on further aggressive monetary tightening.

The pain has affected a clutch of the best-known speculative investors in the market.

London-based Rokos, which manages around $15.5bn, is down around 12.5 per cent this month, said people who had seen the numbers.

At Goldman, a trading desk that handles interest-rate products lost around $200mn, according to people familiar with the matter. Goldman declined to comment.

Chris Rokos: down around 12.5% this month

BlueCrest Capital, bond trader Mike Platt’s investment firm, which made 153 per cent last year thanks in part to bets on rising interest rates, has also lost money, say people familiar with the firm. It is down around 7 per cent this year.

And Andrew Law’s Caxton Macro fund lost around 3 per cent this month.

“What’s hurt a lot of people in macro [bets on global bonds and currency moves] is that everyone was positioned for rates rising,” said one insider in the hedge fund industry. But on Monday, the market moved violently the other way. With prices soaring, the yield on the two-year Treasury note fell at its fastest pace since 1987. Some funds raced to unwind their positions, further fuelling the bond rally.

The “erratic prices action” led to “many investors triggering stop losses on short positions”, said Mark Dowding, chief investment officer at RBC BlueBay.

Macro hedge funds lost 2.15 per cent on average on Monday alone, according to data group HFR, the biggest daily loss since the market turbulence of late 2018. A regular social gathering of hedge fund managers and other investors in London on Thursday night had a “sombre”, wake-like tone, people familiar with the matter said, in contrast to a victorious atmosphere after spectacular returns in 2022.

Rokos hit the headlines in late 2021 when he was wrongfooted by a big sell-off in short-term government debt, as investors panicked that interest rates would have to rise faster than…

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