[Hedge Funds' Share in $30 Trillion U.S. Treasury Market Hits Record High, Regulators Warn of Deleveraging Risks] BlockBeats News, September 30, according to CNBC, hedge funds' share in the approximately $30 trillion U.S. Treasury market has risen to a historic high. As some traditional long-term investors reduce their allocations, hedge funds are becoming an increasingly important buyer in the Treasury market. Data from the U.S. Treasury's Office of Financial Research shows that by the end of 2025, the amount of cash U.S. Treasuries held by hedge funds will reach $2 trillion, about three times the level five years ago, accounting for 7% of the $28.9 trillion in tradable Treasuries, a record high. The latest data from the Federal Reserve also shows that in the first half of 2026, domestic hedge funds in the U.S. continued to be net buyers of Treasuries, with net purchases of $26.4 billion and $60.6 billion in the first and second quarters, respectively, totaling approximately $87 billion. While hedge funds are increasing their allocations, demand for long-term Treasuries from traditional long-term investors such as pension funds is weakening. The OECD pointed out that the shift in pension systems from defined benefit plans to defined contribution plans, as well as some pension funds increasing allocations to private credit and other high-yield, low-liquidity assets, has altered the investor structure of the Treasury market. In 2025, institutional investors allocated nearly $300 billion to private credit instruments. One of the primary strategies employed by hedge funds is basis trading between cash Treasuries and futures, which involves buying spot Treasuries and selling corresponding futures to profit from the small price differences between the two. Due to the thin profit margins, such trades typically rely on repo financing, with leverage ratios reaching up to 20 times or even higher. Morgan Stanley estimates that as Treasury sell-offs intensify, related leveraged positions have already declined by about 20% this year to $1.2 trillion. The Federal Reserve and the Bank for International Settlements have warned that hedge funds' reliance on high leverage and short-term financing could trigger margin calls, forced selling, and rapid deleveraging during periods of increased market volatility, creating a feedback loop of price declines and deteriorating liquidity. However, the frequent trading activity of hedge funds can also provide two-way liquidity to the market and correct pricing inefficiencies, making their role in the Treasury market a double-edged sword, offering both liquidity support and systemic risk. [Original Article Link]