Observations on the Treasury Cash-Futures Basis Trade

We examine the aggregate portfolio of 20 large Commodity Pools (“Select Funds”) likely to account for much of the “long cash-short futures” activity in recent years. Our Select Funds were predominantly short futures, with a notional market value of $1.1 trillion at the end of December 2023. They comprised the bulk of the $1.4 trillion short positions held by the leveraged funds in the sample. The aggregate portfolio contains long Treasury securities totaling around $1 trillion, but also short securities totaling about $200 billion; the net position totals $800 billion at the end of 2023. Net Treasury cash positions are at the high end or above several prior estimates of likely basis trader positions. We confirm and quantify suspected peaks and valleys within the activity. Net Treasury cash positions increased $400 billion in the two years prior to December 2019, then fell off sharply through 2021, and ramped up $700 billion through 2022 and 2023. We also observe significant non-US G-10 sovereign bond positions with a gross value of $1 trillion; the net short position was just over $100 billion at the end of 2023.