Hedge funds have become a major driver of the US Treasury market. Hedge fund cash Treasury holdings stood at $2.35 trillion in Q1 2026, the 3rd-highest reading on record. Over the last 5 years, this figure has surged +154%, or +$1.42 trillion. For perspective, marketable Treasury debt outstanding increased +44% over the same period, to a record $32.2 trillion. As a result, hedge funds now own a record ~7% of the marketable Treasury market, up from ~4% in 2021. A major driver behind the surge is the cash-futures basis trade, where hedge funds take offsetting positions in Treasury securities and futures to profit from small price differences. Because these gains are small, the strategy involves significant leverage. This leverage allows hedge funds to absorb more Treasury debt at a time when the banks that normally help absorb new Treasury supply have limited capacity to hold more bonds. Hedge funds are changing how the Treasury market works.