Article
November 5, 2024
Observations on the Treasury Cash-Futures Basis Trade
- Key basis traders: We examine the aggregate portfolio of 20 large Commodity Pools (“Select Funds”) likely to account for much of the “long cash-short futures” activity in recent years.
- Treasury futures: Our Select Funds were predominantly short futures, with a notional market value of $1.1 trillion at the end of December 2023. They comprised the bulk of the $1.4 trillion short positions held by the leveraged funds in the sample.
- Treasury securities: The aggregate portfolio is long Treasury securities around $1 trillion, but also short about $200 billion; the net position totals $800 billion at the end of 2023. Net Treasury cash positions are at the high end or above several prior estimates of likely basis trader positions.
- How we got here: We confirm and quantify suspected peaks and valleys of the activity. Net Treasury cash positions increased $400 billion in the two years prior to December 2019, fell off sharply through 2021, and then ramped up $700 billion through 2022 and 2023.
- More than just Treasury traders: We also observe significant non-U.S. G-10 sovereign bond positions with a gross value of $1 trillion; the net short position was just over $100 billion at the end of 2023.
