IDEAS home Printed from https://ideas.repec.org/a/eee/moneco/v155y2025ics0304393225000947.html
   My bibliography  Save this article

Hedge funds and the Treasury cash-futures basis trade

Author

Listed:
  • Barth, Daniel
  • Kahn, R. Jay

Abstract

This paper studies hedge funds’ arbitrage positions in the Treasury cash-futures basis trade, which profits from the disconnect between cash and futures prices. At times, the trade has surpassed $1 trillion in gross exposures. Basis traders consistently account for more than 60% of all hedge fund Treasury positions and 70% of all hedge fund repo. We show how frictions can introduce a positive association between arbitrage quantities and spreads, and how these frictions may propagate stress in the Treasury market during periods of instability such as in March 2020.

Suggested Citation

  • Barth, Daniel & Kahn, R. Jay, 2025. "Hedge funds and the Treasury cash-futures basis trade," Journal of Monetary Economics, Elsevier, vol. 155(C).
    • Handle: RePEc:eee:moneco:v:155:y:2025:i:c:s0304393225000947
    DOI: 10.1016/j.jmoneco.2025.103823
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0304393225000947
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jmoneco.2025.103823?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:moneco:v:155:y:2025:i:c:s0304393225000947. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505566 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.