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2026-09-22

Wall Street strategists say a popular US Treasury basis trade has dropped to its smallest scale in more than two years, fewer reflecting exploitable mispricings and reduced liquidity provision from hedge funds. The levered strategy, which arbitrages

Wall Street strategists say a popular US Treasury basis trade has dropped to its smallest scale in more than two years, fewer reflecting exploitable mispricings and reduced liquidity provision from hedge funds. The levered strategy, which arbitrages small futures–cash price gaps, has cooled as those spreads compressed, weakening an important source of Treasury demand. Morgan Stanley and Citigroup strategists say the trade is not disappearing but that momentum has waned as relative-value opportunities narrow; Citigroup’s head of US rates strategy Jason Williams said lower market dislocations and have volatility trimmed basis positions and could imply stronger-than-expected Treasury demand. Morgan Stanley estimates nominal notional of leveraged participation in Treasury basis trades fell from $1.26 trillion at the start of the year to about $900 billion.
2026-09-22

WILLIAMS said holding reserves should not carry an opportunity cost.

WILLIAMS said holding reserves should not carry an opportunity cost.
2026-09-22

Federal Reserve's Williams: The Federal Reserve's interest rate control system is very effective.

Federal Reserve's Williams: The Federal Reserve's interest rate control system is very effective.
2026-09-22

Fed's Williams said the Fed will adjust the supply of reserve balances as market conditions warrant.

Fed's Williams said the Fed will adjust the supply of reserve balances as market conditions warrant.
2026-09-22

Federal Reserve's Williams: Holding reserves should not have an opportunity cost.

Federal Reserve's Williams: Holding reserves should not have an opportunity cost.
2026-09-22

Federal Reserve's Williams: The Federal Reserve will adjust the supply of reserves according to market conditions.

Federal Reserve's Williams: The Federal Reserve will adjust the supply of reserves according to market conditions.
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