Bashing hedge funds that trade Treasuries could cost taxpayers money
Why fears about the “basis trade” are overblown
There is no more important financial market than American government debt, and it is growing fast. In the 12 months to October the Treasury, on net, issued $2.2trn in bills and bonds, worth 8% of GDP, to fund America’s gaping deficit. Adding to the supply, the Federal Reserve has shrunk its own portfolio of Treasuries by nearly $1trn since mid-2022. Foreign demand is flat, meaning the Treasury increasingly needs big asset managers and hedge funds to buy its debt. That is worrying some regulators. Could capricious hedgies shake the foundation of the global financial system?
This article appeared in the Leaders section of the print edition under the headline “Gensler v Griffin”
Leaders December 9th 2023
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- A messy contest is coming to a head behind Donald Trump
- Bashing hedge funds that trade Treasuries could cost taxpayers money
- Green protectionism will slow the energy transition
- Covid-19 was a disaster for the world’s schoolchildren
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