Market Risk Warning: Potential Risk on the U.S. Treasury Market
Important Market Risk Alert: Escalating Geopolitical Tensions and Potential Impact on the U.S. Treasury Market
Dear Valued Client,
We are writing to inform you of a significant escalation in geopolitical tensions. According to multiple foreign media reports, Israel may be preparing for potential military action against Iran's nuclear facilities in the near future. Concurrently, the United States has announced the evacuation of its citizens from the region, a measure often interpreted as a signal of heightened conflict risk.
Should such an event materialize, it is highly likely to trigger severe global market volatility and a sharp increase in risk-aversion sentiment. We anticipate that a substantial volume of safe-haven capital could rapidly flow into the U.S. Treasury market, which is traditionally considered a refuge asset.
Of particular concern is that this large-scale, sudden capital influx could exert unexpected pressure on the structure of the U.S. Treasury market, potentially triggering a "Treasury basis trade unwind" risk. In simple terms, if the spot price of U.S. Treasuries surges abnormally due to safe-haven buying, potentially exceeding futures prices, highly leveraged basis arbitrage strategies could face significant losses, forcing large-scale unwinding of positions. This chain reaction could lead to a sharp contraction in liquidity предоставление by primary dealers in the repurchase (Repo) market, which in turn could potentially cause a liquidity freeze or even a temporary "seizure" in the U.S. Treasury market, where trading becomes extremely difficult or can only be executed at highly unfavorable prices.
In light of these potential extreme market risks, we strongly advise you to:
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Closely Monitor Developments: Please stay continuously updated on geopolitical developments in the Middle East and related official statements and reputable media reports.
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Prudently Assess Your Asset Allocation: Review your current investment portfolio, particularly any holdings in U.S. Treasuries, Treasury-related derivatives, and strategies reliant on short-term financing, to evaluate their risk exposure under extreme market volatility.
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Maintain Sufficient Liquidity: In an environment of heightened uncertainty, maintaining an appropriate cash position or highly liquid assets may be particularly important to manage potential sudden events and margin calls.
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Be Alert to Abnormal Market Volatility: If the situation escalates, expect sharp price movements across various asset classes. Please be mentally prepared and have risk management plans in place.
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Seek Professional Advice: If needed, please do not hesitate to contact your financial advisor or our professional team to discuss coping strategies.
Please note that this alert is intended to draw your attention to potential risks and does not constitute any specific investment advice. Market movements are difficult to predict accurately, especially when driven by such extreme events. We will continue to monitor market developments and strive to provide you with the latest information and support.
Please proceed with caution, and we wish you success in your investments.
Sincerely,
MAITELAINI Team
June, 12th, 2025
Disclaimer: This notification is for informational purposes only and does not constitute any investment advice or an offer to invest.