TFTC: A Bitcoin Podcast 674: How Hedge Funds Became America's Largest Creditor with Infranomics
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Oct 22, 2025 In this engaging discussion, Robert from Infranomics, a macro analyst specializing in Treasury markets, unveils how hedge funds now hold a staggering $1.8 trillion in U.S. debt through the basis trade. He explains the hidden risks of this leverage, the implications for liquidity during market stress, and how political tensions could exacerbate financial instability. Robert emphasizes Bitcoin as a crucial safe haven in an era of debasement and discusses the shifting importance of gold and bearer assets amid rising populism.
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Cayman Islands Are The Largest Holder Of U.S. Debt
- The Fed revealed Cayman Islands hold $1.8T of U.S. debt, largely hedge funds using the basis trade.
- That makes Cayman the largest reported holder and exposes hidden leveraged Treasury risk.
Basis Trade Uses Massive Hidden Leverage
- The basis trade shorts Treasury futures and longs cash treasuries to pocket a tiny spread while remaining delta neutral.
- Funds lever the trade up to 50–100x, creating massive hidden systemic leverage.
Repo Market Stress Threatens Basis Unwind
- SOFR and repo market dynamics are central because the basis trade is financed nightly in repo.
- Elevated SOFR versus Fed rates signals funding stress that threatens a basis trade unwind.