UniCredit analysis suggests that hedge funds may have become a larger source of structural risk in the US Treasury market. Federal Reserve data shows that as of September 2025, large hedge funds held approximately $2.4 trillion in long positions in US Treasuries, representing about 8.5% of the market; if short positions of $1.6 trillion are included, the total exposure reaches $4 trillion, more than double that at the beginning of 2023.
More critically, the leverage structure is significant: hedge funds have raised $3 trillion in cash through the repurchase market, with the top 50 funds accounting for approximately 90% of this exposure. Of this, cash-futures basis trading accounts for approximately $830 billion, and swap arbitrage accounts for approximately $305 billion. These strategies rely on short-term financing and low margin requirements; once spreads widen, repurchase agreements tighten, or margin requirements increase, it could trigger concentrated deleveraging, amplifying normal adjustments into liquidity shocks.
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