Hedge funds’ growing use of leveraged positions in the $25.1 trillion Treasury market is back in the spotlight again, this time with one major Wall Street firm warning of what might happen if those trades are rapidly unwound.In a note released on Tuesday, strategist Steven Zeng of Deutsche Bank DB said such a scenario would essentially lead to a repeat of the Treasury market volatility that occurred in March 2020 and is something that the Federal Reserve “wants to avoid.”
The basis trade is an arbitrage maneuver that involves…
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