Basis-trade hedge funds borrowed $3 trillion in repo market as of July 2025, New York Fed data show

The two $3.0 trillion figures come from different months. The hedge-fund number is from July 2025 and the money-fund number from January 2026 ^[3][7]. The cash also does not pass directly between the two groups. Dealers stand in the middle and lend to borrowers such as hedge funds, which cannot deal with the repo market directly ^[11]. Wolf Street's account of the New York Fed report ^[16] does not say how much of the money-fund cash ends up in basis positions.

The totals do show how concentrated the borrowing is. More than $13.5 trillion in repo is outstanding on a typical day, about 70% of it backed by Treasuries ^[1][2]. By July 2025, basis-trade borrowing was about 4.5 times its 2017 level ^[1], and the final year of the series added $500 billion on its own, a 20% rise ^[2]. The trade needs that much borrowing because the spread between cash Treasuries and futures is small, and repo leverage is how funds make it pay ^[4]. The basis book is about 2.5 times the combined repo borrowing of foreign bank branches, US banks and REITs ^[3]. In other words, repo cash funds one Treasury spread on a bigger scale than it funds banks and mortgage REITs put together. "Hedge fund leverage is multi-layered and complex," Richter wrote of the funds' two-way repo positions ^[14].

Measured against total money-fund assets ^[8], the January repo figure comes to about 36% ^[4], though the two numbers are from different months. Overnight repo is how funds meet redemptions while keeping their cash invested ^[13]. I'd expect it to be the first holding a fund lets mature without rolling over when households ask for their money back.

The benign case is that fund balances keep rising, as they did over the past year ^[8], and dealers keep passing the cash along to a growing basis book. A second case has funds still growing but putting new money somewhere else. Repo lending in January 2026 was still $300 billion short of its April 2023 high ^[6]. If that gap widens while basis borrowing rises, dealers have to find other cash for the same positions. Or the break starts with the positions themselves, as it did in March 2020. Hedge funds unwound part of the trade, the Treasury market locked up, and the Fed cited the episode among its reasons for massive Treasury purchases ^[5]. Of the arrangement, Richter wrote: "It works really well, until it suddenly doesn't." ^[15]

I think the money-fund half is the steadier one. Household money-fund holdings are at a record ^[8]. The Fed's warnings have centered on hedge funds' leverage and opacity, and on their part in the fall 2019 repo blowout ^[12]. On that evidence, the weak point is the roughly $1.7 trillion of net hedge-fund borrowing ^[10] and the dealers who stand between it and the lenders ^[11]. How much room those dealers have depends on how much money-fund cash they get. This view is wrong if money-fund repo lending falls in a quarter when fund assets rise and basis borrowing holds up. That would mean the lenders were choosing to leave the trade's funding chain.