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Hedge funds built a $1.2 trillion Treasury trade on money they have to keep borrowing

Companies can own a mountain of US government debt without betting that bond prices will rise. Hedge funds buy Treasury securities and sell futures against them to collect a small pricing gap, borrowing most of the purchase money to make the return worthwhile.

Andjela RadmilacCryptoSlate · October 3, 2026 · 17h ago

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Key points

  • Morgan Stanley estimated Treasury cash-futures basis positions fell 20% this year to about $1.2 trillion, according to Sept. 24 reports, finding no evidence of broad basis-related stress.
  • The article explains funds buy Treasuries, sell futures and fund purchases with overnight repo, exposing them to variation margin calls and higher haircuts.
  • Federal Reserve researchers estimated $830 billion of basis positions for September 2025 in June research, using a different approach that isn't comparable to Morgan Stanley's.

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