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...
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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