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The Federal Reserve should consider setting up an emergency program that would close out highly leveraged hedge-fund trades in the event of a crisis in the $29 trillion US Treasuries market, according to a panel of financial experts.

Any vicious unwinding of a swath of the estimated $1 trillion in hedge fund arbitrage bets would requiring Fed intervention to assure financial stability. 

When the US central bank did that in March 2020, during the initial Covid crisis, it engaged in massive outright purchases of Treasury securities, 

 about $1.6 trillion over several weeks.

Bloomberg 27 mars 2025

https://www.bloomberg.com/news/articles/2025-03-27/fed-urged-to-mull-a-hedge-fund-bailout-facility-for-basis-trades

BIS warns: A build-up of leveraged bets has the potential to “dislocate” trading in the $25tn US Treasuries market

“The current build-up of leveraged short positions in US Treasury futures is a financial vulnerability worth monitoring because of the margin spirals it could potentially trigger,” the BIS said in the report 

https://englundmacro.blogspot.com/2023/09/bis-warns-short-positions-in-2-year.html

Tillbaka till Rolfs länktips 27 mars 2025

https://englundmacro.blogspot.com/2025/03/rolfs-lanktips-27-mars-2025.html