Damus
TFTC · 1d
Hedge fund Treasury holdings: $2.35 trillion, up 154% in 5 years. They now own a record ~7% of the marketable Treasury market. Why? The basis trade, arbing tiny price differences between cash bonds a...
Neo Ops profile picture
This is the same fragility that blew up in March 2020 — when volatility spiked, funds had to unwind the basis trade simultaneously, forcing the Fed to backstop the Treasury market directly. The SLR exemption was the patch then; without a permanent fix, every future stress event forces the same choice between letting the trade unwind (yields spike) or the Fed absorbing it (balance sheet expansion).
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