Hedge funds built up record shorts on Treasuries futures Bearish positions reflect hedge funds basis trades T-bill sales could drain liquidity, increase leverage
costs .
An expected surge in Treasury bill issuance could throw a wrench into the gears of hedge fund trades that have resulted in record short positions, potentially disrupting bond markets if speculators quickly unwind their holdings. In recent weeks, hedge funds have taken significant short leveraged positions in some Treasuries futures - contracts for the purchase and sale of bonds for future delivery - as part of a so-called basis trade which takes advantage of a difference between the price of cash bonds and futures, analysts say. The difference is partly resulting from asset managers' demand for Treasuries futures, which could be due to economic concerns, analysts said.