Column-US Treasury futures leverage, positions back on the rise: McGeever

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What's different a year after the wildfires? | SaltWire #novascotia #firefighting #wildfires #newsORLANDO, Florida - Leverage in the U.S. Treasury market is picking up again, counterintuitively feeding off a"higher-for-longer" interest rate environment and building up potential trouble in the event of a price or rate shock.

Data shows that asset managers' aggregate long position, spear-headed by mutual fund buying, has rocketed to a new record and leveraged funds' short position is also expanding, bringing the basis trade back into focus. These figures coincide with a new 82-page paper 'Reaching for Duration and Leverage in the Treasury Market' by Federal Reserve economists, a deep-dive analysis of positioning data in Treasuries futures.

"An indirect consequence of mutual funds' demand for futures positions is the associated Treasury market leverage introduced through hedge funds. Both of these sources of leverage may present increased risks to Treasury markets, as materialized during March 2020," they added.In early 2020 a disorderly unwind of hedge funds' short positions triggered severe volatility and illiquidity in the Treasury market.

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