Treasury Doom Loop: The World's Most Dangerous Trade?
Many Happy Returns
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Understanding the Basis Trade and Leveraging Profit
This chapter delves into the concept of the basis trade in the treasury market and how hedge funds leverage this trade to potentially increase their profit. It discusses the use of leverage in trading US treasuries, including borrowing money in the repo market and utilizing futures contracts. The chapter also explores the risks involved in the basis trade and the concentration of risks in centralized counterparties.
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