Hedge funds hold $2 trillion in US debt, but their next trade could require fewer bonds
Summary
Hedge funds held an estimated $2 trillion in cash Treasuries at the end of 2025, but Dallas Fed research suggests they may reduce bond holdings by shifting from cash-futures basis trades to swap-spread strategies that use less Treasury exposure for similar risk. A gradual decline in hedge-fund demand could require other buyers or higher yields, without indicating a disorderly selloff. Funding stress is a separate risk: tighter repo terms or margin calls can force rapid sales and potentially affect other liquid assets, including Bitcoin, though any connection must be demonstrated. Available estimates show strategies moved differently during the April 2025 tariff episode, underscoring that positions do not necessarily unwind together.
