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SI414: The Hidden Risks Beneath the Treasury Market ft. Mark Rzepczynski
Description
Niels Kaastrup-Larsen and Mark Rzepczynski examine the warning signs emerging beneath seemingly calm markets, from extreme single-stock moves and commodity shortages to growing strains in the U.S. Treasury market. They explore how leveraged hedge funds and basis trades have become increasingly important to Treasury liquidity, and why market plumbing can matter as much as price signals. The conversation then turns to the evolution of trend following, comparing different approaches to signals and position sizing, the benefits of combining methodologies, and why short-term trend strategies face structural challenges. Finally, Mark reflects on the legacy of quantitative trading pioneer Victor Niederhoffer.
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Episode TimeStamps:
00:00 - Introduction and summer reflections
01:42 - Warning signs and rumblings beneath the markets
07:06 - Extreme single-stock moves and hidden risk
10:09 - Copper, inventories and commodity squeezes
13:08 - Oil markets and the danger of disappearing buffer stocks
14:51 - August trend following performance
16:01 - Why market uncertainty could create new trends
20:37 - The Treasury buyback program and bond market liquidity
27:10 - Is the Treasury quietly stabilizing long-term yields?
31:56 - The plumbing problem inside the U.S. Treasury market
36:28 - Hedge funds, basis trades and leverage
41:4