(with Daniel Barth, Daniel Beltran, Matthew Hoops, Jay Kahn, Emily Liu, and Maria Perozek ), October 2025
By combining various data sources, we find that hedge fund basis trade positions are dominated by hedge funds domiciled in the Cayman Islands, and that this activity is not well captured by the TIC data. As a result, the TIC data appear to severely undercount Cayman-domiciled hedge funds' holdings of U.S. Treasuries by around $1.4 trillion as of the end of 2024, presenting a major impediment for researchers, policy makers, and other data users seeking to analyze cross-border flows and their effects on the U.S. economy and financial markets. The TIC data are also a key data source for the Financial Accounts of the United States – Z.1 (Financial Accounts), which provides a unique framework for studying both Treasury market dynamics and household balance sheet developments. Mismeasurement of Treasury exposures in the TIC data directly affects Financial Accounts measures of transactions and positions of Treasury market participants and indirectly affects measures of personal saving and household net worth.
(with Jay Kahn), August 2023
The Treasury basis trade exploits the price difference between Treasury bonds and futures. The trade is exposed to financing and liquidity risks that can affect market liquidity. This brief summarizes evidence on the size and extent of basis trading by hedge funds, and on whether these trades contributed to Treasury market illiquidity in March 2020. Timely intervention by the Federal Reserve in the Treasury and repurchase agreement markets may have limited the extent of spillovers that could affect financial stability.
(with Jay Kahn), July 2020
The Treasury basis trade exploits the price difference between Treasury bonds and futures. The trade is exposed to financing and liquidity risks that can affect market liquidity. This brief summarizes evidence on the size and extent of basis trading by hedge funds, and on whether these trades contributed to Treasury market illiquidity in March 2020. Timely intervention by the Federal Reserve in the Treasury and repurchase agreement markets may have limited the extent of spillovers that could affect financial stability.