FILE PHOTO: A cyclist passes the Federal Reserve building in Washington, DC, U.S., August 22, 2018. REUTERS/Chris Wattie/File Photo/File Photo
HEDGE funds look to be scaling down their record short position in US Treasury futures, marking the beginning of the end of the so-called “basis trade” – an unwind that regulators have warned could pose severe financial stability risks.
With the Federal Reserve (Fed) expected to begin cutting interest rates next year, perhaps as early as March, attention will intensify on the reversal of the lucrative trade for hedge funds when rates were rising.
