What Is the Treasury Bonds Basis Trade, and Is It Over?

What Is the Treasury Basis Trade, and Is It Over? Global bond markets have been roiled since the Iran-US conflict began. Surging energy prices together with massive corporate borrowing and ever-expanding government debt issuance have sent Treasury bond prices plummeting, pushing yields to the highest level in nearly two decades. The rout prompted US Treasury Secretary Scott Bessent in August to increase buybacks of the government’s own longer-dated bonds, in an unusual intervention aimed at lowering Americans’ borrowing costs. But the buybacks, which could reach $30 billion or more by November, make up only a small proportion of the $32 trillion Treasury market and have had little sustained impact so far. That brought renewed focus on another key source of demand, hedge funds, which in recent years have been buyers of Treasury bonds through a trading strategy known as the basis trade.