$830 billion of hedge funds’ Treasury long positioning was tied to the cash-futures basis trade as of September, according to a Federal Reserve report.
The Fed said the revival of that highly leveraged arbitrage strategy drove the surge in Treasury exposure, pushing basis-trade positions to about double their previous peak in early 2020.
That slice now represents 35% of hedge funds’ total long Treasury exposure, which the report said is still dominated by arbitrage trades including swap spreads and maturity-matched strategies.