Treasury basis trade loses its allure as returns shrink
Tight spreads and rising funding costs are pushing the cash-futures basis trade out of favour
The popular US Treasury cash-futures basis trade is losing its appeal among hedge funds as shrinking returns struggle to offset the cost of funding, according to market participants.
“Many of the clients we speak with are bemoaning that the basis is dead and no longer offers much of an attractive opportunity versus repo,” said Chris Horvatin, a managing director on Goldman Sachs’s repo and short
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