MarketPR
In focus for fixed income desks: CME Group (CME) is launching a new instrument designed to simplify execution of the Treasury basis trade and cut the cost of a hedge fund strategy that regulators and market observers have linked to volatility in U.S.
The next confirmable milestone is the formal product launch, including any exchange filings or regulatory approvals that will clarify the instrument's structure.
The trade and why it matters The basis trade captures the price gap between cash Treasury securities and Treasury futures contracts.
Hedge funds running the strategy typically hold the physical bond long and the futures contract short, collecting the spread between the two.
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