Hedge funds are sitting on $1.2T in one of the Treasury market's biggest leveraged plays right now.
The setup: Buy US Treasuries, short Treasury futures, pocket the spread. Sounds boring until you realize they're levering up HARD through the repo market to juice those razor-thin returns.
Morgan Stanley says the trade's already down ~20% this year.
That's $240B+ unwound. When leveraged basis trades blow up, liquidity dries up fast. Watch for volatility spikes in $TLT and funding stress if this keeps unraveling.
Risk-off could hit crypto liquidity hard if TradFi starts scrambling for collateral.
The setup: Buy US Treasuries, short Treasury futures, pocket the spread. Sounds boring until you realize they're levering up HARD through the repo market to juice those razor-thin returns.
Morgan Stanley says the trade's already down ~20% this year.
That's $240B+ unwound. When leveraged basis trades blow up, liquidity dries up fast. Watch for volatility spikes in $TLT and funding stress if this keeps unraveling.
Risk-off could hit crypto liquidity hard if TradFi starts scrambling for collateral.
