1994 vs 2013: Spot The Carbon-Copy Similarities

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In 1994, investors were caught off guard because the duration of their positions -- a great deal of which were mortgage-backed securities -- was lengthened beyond their targets due to rising interest rates. Those investors used Treasuries as a means to sell duration because they were their most liquid assets. Credit spreads soon exploded as dealers lacked the ability to take on larger positions from would-be sellers. Both sides of the Street were sprinting in one direction, leading to a violent stampede for the only exit.

It appears we are witnessing a similar cascade today.