On Thursday, an unknown entity placed a one billion dollar trade in the bond futures market that will profit if US interest rates rise. This means that a major proprietary trader almost certainly knows either that the Federal Reserve will shortly raise interest rates or that the US credit rating is going to be dropped from AAA to AA by credit rating agencies, or both. If this trader is correct, the profit realized could approach 10 to 1. If wrong, the entire billion dollars could be lost overnight.

To an extent, the trade may have been intended to frighten the market, and it did cause traders long treasury bonds and futures to begin a frantic wave of selling, which developed into sharp losses for US bonds on Friday. The number of entities that can afford risk on that scale is extremely small. Hedge fund manager John Paulson could afford it. PIMCO (the Pacific Investment Management Company) could afford it, and the United States and Chinese central banks could as well. It is also possible that a consortium has been formed that could afford it. Paulson is famous for having made $6 Billion when he traded against subprime mortgages prior to the 2008 meltdown.

It’s clear that while Congress argued over the debt ceiling and the average person tries to get (or keep) a job, background manipulators are (as usual) cashing in. This is the kind of dynamic information and interpretation that you just can’t get anywhere else! Make sure we’re still here tomorrow: Subscribe today!

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