Hedge Funds Hold Record 7% of US Treasurys, Raising Concerns Over Basis Trade Risks

Hedge funds held a record 7% of tradable US Treasurys by the end of 2025, totaling approximately $2 trillion in holdings. Regulators, including the Office of Financial Research and the Bank for International Settlements, warn that the high leverage used in cash-futures basis trades could trigger market instability. If volatility spikes, margin calls may force funds to rapidly unwind positions, potentially leading to a sell-off in the Treasury market.