Losses for hedge funds betting big on the so-called reflation trade piled up in July, exacerbated by a dizzying rally in US government debt this summer that pushed Treasury yields to multi-month lows.

Graham Capital Management, Rokos Capital Management and Brevan Howard were among the funds hit, with Graham losing about 4.5 per cent in its $2.6bn Absolute Return fund in July, before recovering 0.8 per cent this month. Rokos lost 3.8 per cent last month, while Brevan Howard lost 3.9 per cent in a $1.2bn portfolio run by trader Alfredo Saitta.

The soured trades hinged on a view that higher growth and inflationary pressures from America’s emergence from the coronavirus pandemic would weigh heavily on longer-dated Treasury bonds, whose fixed payments erode in value over time in prolonged periods of rising consumer prices.