Hedge funds reverse war premium trades as Iran deal progresses
Hedge funds are adjusting their strategies in response to the US-Iran deal, reversing the war premium across various asset classes.
The trade involves going long on bonds, short on the dollar, and investing in Asian equities and currencies, driven by fading Fed hike expectations.
The two-year Treasury yield has dropped to 4.02%, while the yen is attracting significant conviction due to Japan’s energy import dependency.
Southeast Asian equities offer asymmetric upside potential if the deal holds, although fund managers remain focused on AI as a dominant theme.