It has been called the “largest arbitrage ever documented” – a 175 basis point spread between US government debt and US Treasury inflation-protected securities (Tips), which emerged after the collapse of Lehman Brothers in 2008.
As panic gripped the markets, investors sought the safety of liquid government bonds, pushing yields lower. At the same time, Lehman Brothers and its counterparties chose to dump Tips posted as collateral in repo trades and derivatives transactions. For a time, dealers
The week on Risk.net, October 6-12, 2017Receive this by email