“The Federal Reserve has published data that shows hedge funds now own more treasuries than China — at least officially — Japan and Saudi Arabia combined. They are the single biggest holders of treasuries now.”
Slate Money · September 2026
Felix Salmon had just put it to him that the Treasury market used to belong to the most boring investors in the world, central banks that bought bonds and sat on them, and is now in the hands of traders who move fast and overreact. Wigglesworth agreed and went further. The market he calls the global financial system's bunker is now dominated by extremely leveraged hedge funds running the basis trade, which he says makes it more brittle and is genuinely alarming.
Transcript
It is, I think, one of the most, I mean, people like us, we discuss this stuff, but I think it's probably like on a broader level, one of the least discussed subjects that I think should get more attention. You know, it's partially just the fact that every guy. Government in the world has been borrowing a ton over the past few years. And that big global savings glut that people like Ben Bernanke used to talk about, that's looking slightly less glutty these days. Well,
it's actually disappeared, right? It's like gone.
You can measure it in different ways. And for example, like the China one, for example, like China looks like it's selling or moving out of treasuries. I'm pretty certain that what China's actually doing is that they're getting state-owned banks to buy treasuries instead. And they're buying U.S. agency debts or bonds issued by Fanny and Freddie that are guaranteed or implicitly guaranteed by the U.S. government. So it's kind of treasuries in drag and they're just hiding it. I think it's foreign investors not really selling much, but like they can't absorb the sheer amount of new bonds coming to hitting the market all the time. And hedge funds have really stepped into the breach. That is true actually in the UK as well and in Europe too. But the US is where it's super clear, where the Federal Reserve has published data that shows the hedge funds now own more treasuries than China, at least officially, Japan and Saudi Arabia combined. They are the single biggest holders of treasuries now. That
seems so hedge funds are not the transparent democratic institutions we celebrated earlier in the conversation. Establish that.
No, but I'd say some of like a big chunk of this is actually them almost rendering a service. I mean, I hate to carry water for hedge funds here, but really it's basically there's all sorts of technical arbitrage opportunities where they're not really like, they're not YOLOing into treasuries. They're kind of buying treasuries so they can provide something called treasury futures to ordinary US mutual funds that want to buy for all sorts of annoying regulatory and technical reasons. The
basis trade. So it's
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