As of the first quarter of 2026, hedge funds held an estimated $2.35 trillion in cash-bearing U.S. Treasury bonds, a 154% increase from five years ago. During the same period, the balance of tradable U.S. Treasury bonds only increased by about 44% to $32.2 trillion, raising their holdings to approximately 7%. While the U.S. Treasury market has gained more liquidity, it has also become more vulnerable. If repurchase rates jump, futures margin requirements increase, or spreads widen in the opposite direction, funds may be forced to sell off bonds en masse, amplifying yield volatility.
