A new FEDS note released by the Federal Reserve Board shows that Treasury International Capital (TIC) data have significantly undercounted U.S. Treasury securities held by hedge funds domiciled in the Cayman Islands. The note links the rise in the Treasury cash‑futures basis trade—where hedge funds short futures and buy Treasuries—to a $1.4 trillion gap between TIC reports and fund‑level filings from SEC Form PF as of the end of 2024. The underreporting distorts the Financial Accounts of the United States, affecting estimates of household net worth and personal saving rates. The report suggests that Cayman‑based funds now account for a larger share of U.S. Treasury holdings than previously reflected in official statistics.
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https://www.federalreserve.gov/econres/notes/feds-notes/the-cross-border-trail-of-the-treasury-basis-trade-20251015.html
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