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Treasury basis hedge fund trade shows signs of losing momentum

The strategy’s appeal is weakening as price gaps narrow and market dynamics shift, reducing incentive for the trade.

Reported · Written up by our desk · Fund Industry

Hedge funds running a major US Treasury market trade, known as the Treasury basis strategy, are showing signs of slowing momentum, according to a Bloomberg report cited by Hedgeweek.

The outlet said the growth of the trade has started to cool as narrowing pricing gaps and changing market dynamics reduce the strategy’s attractiveness.

As those conditions evolve, hedge fund exposure to the strategy appears less compelling than it was earlier in the buildup, the report indicated.

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