A hedge fund reportedly lost $1.5 billion in a bond market short-squeeze as bets on rising rates turned sour

• Hedge fund Alphadyne reportedly lost $1.5 billion in a bond market short-squeeze, Bloomberg repported.
• The hedge fund slipped 4.3% in June and another 2.5% in July, according to the report.
• Its flagship fund, the Alphadyne International Fund, also lost around 10%.

Alphadyne Asset Management, a New York-based hedge fund, reportedly lost $1.5 billion in a bond market short-squeeze as bets on rising rates turned sour, Bloomberg reported.

The losses, which are some of the biggest publicly revealed among macro-focused hedge funds, are indicative of the unusual economic environment that has characterized 2021 - with inflation readings at their highest in a decade and benchmark interest rates near zero - and how managers have struggled with such historical anomalies.

Bloomberg points to the flattening of the five- to 30-year yield curves in just three days in June, which caught many by surprise, including Alphadyne. The hedge fund slipped 4.3% to its worst month in history in June when its managers positioned for a steeper US yield curve and higher interest rates broadly, according to the report.

By July, the hedge fund - whose investors include pensions, insurance companies, and sovereign wealth funds - lost another 2.5%, Bloomberg reported.

Hedge funds have mostly scaled back betting against Treasury futures as rates continue to hover near historic lows despite rising inflation.