Forget AIpocalypse, Death Of The Basis-Trade Could Kill The Long-Bond

Authored by Simon White, Bloomberg macro strategist,

Death of the Basis Trade Is Treasury’s P(Doom)

Hedge funds present a significant risk for liquidity in Treasuries if they step further back from the basis trade, as its profitability declines and yield volatility rises. Buybacks are unlikely to be the last measure we see to try to maintain smooth functioning in the bond market.