Hedge Funds Amass $2 Trillion of Treasurys as Leverage Stokes Systemic Risk Fears
Updated
Updated · CNBC · Sep 30
Hedge Funds Amass $2 Trillion of Treasurys as Leverage Stokes Systemic Risk Fears
3 articles · Updated · CNBC · Sep 30
Summary
$2 trillion in Treasury holdings left hedge funds owning a record 7% of the $28.9 trillion marketable U.S. debt market at end-2025, with Fed data showing they kept buying in the first half of 2026.
$87 billion of net purchases in the first six months of 2026 came as traditional long-term buyers such as pension funds pulled back, shifting toward defined-contribution structures and higher-yielding private credit.
Leverage is the central concern: basis-trade positions can be levered 20 times or more through repo financing, creating vulnerability to margin calls and forced selling if volatility spikes.
A roughly 20% drop this year in leveraged Treasury basis trades to $1.2 trillion shows funds are already turning more selective as yields jump, with the 10-year at its highest since 2007 and the 30-year since 2002.
Regulators including the Fed and BIS say hedge funds now provide needed Treasury-market liquidity but also pose a growing risk of disorderly unwinds that could spill across the financial system.