The huge leverage that hedge funds are employing as part of the so-called basis trade

The world’s most influential regulators are intensifying their scrutiny of a mounting potential risk to  the $25tn US government bond market.

 The so-called basis trade involves playing two very similar debt prices against each other — selling futures and buying bonds — and extracting gains from the small gap between the two using borrowed money.

Such risks matter because the US Treasury market underpins the global financial system.

FT 26 September 2023

https://www.ft.com/content/a8348e2a-a90f-474c-baa6-8c2eb0e263c2