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Regulators are almost feuding with hedge fund "speculators" over something called a basis trade. The former alleges it is a huge systemic risk, and they are right though for the wrong reasons. In the latter group, supporters point out funds have become necessary balance sheet warehouses for Treasuries because of a key gap. Here we'll examine what that gap really is and why it actually matters to find out who is right (spoiler: both).
Eurodollar University's Money & Macro Analysis
Bloomberg: Griffin Says Scrutiny of SEC Basis Trade ‘Utterly Beyond Me’
https://www.bloomberg.com/news/articles/2023-10-25/ken-griffin-says-sec-scrutiny-of-basis-trade-utterly-beyond-me
OFR WP 2021-01: Hedge Funds and the Treasury Cash-Futures
Disconnect
https://www.financialresearch.gov/working-papers/files/OFRwp-21-01-hedge-funds-and-the-treasury-cash-futures-disconnect.pdf
Twitter: https://twitter.com/JeffSnider_AIP
https://www.eurodollar.university
RealClearMarkets Essays: https://bit.ly/38tL5a7
