Basis trade loses its bite as banks move in
The Treasury basis trade, as cynics like to say, is akin to picking up pennies in front of a steamroller. Except the pennies are getting harder and harder to find.
Returns in the popular hedge fund strategy have dwindled to a few basis points, as large dealers muscle in on the trade. Many firms are now questioning its viability.
“The basis trade is basically a very boring trade right now,” says a
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