Good article as always !! What’s concerning for me is that the very foundation of this crucial market has become increasingly fragile. A surprisingly large share of the Treasury market is now effectively held together by hedge funds running basis-trade arbitrage. This is one issue versus another, cash bonds versus futures, or even versus interest-rate swaps. It’s a structure that functions smoothly only so long as volatility remains contained and funding stays abundant.

Everyone understands the market is vulnerable to a correction. But when the plumbing itself is stretched thin, the risk is not of a gentle repricing, more like a vacuum drop. A stressed funding environment, a spike in volatility, or a temporary breakdown in arbitrage capacity could turn a routine adjustment into a fireball.

I should add the caveat that I spent years as a U.S. Treasury market maker, so perhaps I’m predisposed negatively to see the cracks. But the structural weaknesses are real, and the scale of borrowing now required makes them harder to ignore.