Reported 8 months ago
The basis trade, a strategy used by hedge funds to profit from price differences between Treasury bonds and futures contracts, is gaining popularity again. However, concerns arise about potential disruptions in liquidity due to the reliance on leverage from borrowing securities. Short positions in Treasuries have increased, and while funding markets remain stable, the ongoing appetite for basis trades could make the markets vulnerable to pressure. Hedge funds may face challenges if volatility erupts, leading to rapid position unwinding and liquidity disruptions in the Treasury market.
Source: YAHOO