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Basis Trading: Profits Amid Treasury Market Risks

4/11/2025

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Summary

Story summary

Basis trades capitalize on price differences between cash Treasuries and Treasury futures.
The strategy involves three components: cash Treasury markets, Treasury futures markets, and repo markets.
Profit is generated from the basis spread, calculated as the price difference minus financing costs.
Key risks include rollover and margin risks, impacting profitability and market liquidity.

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Story summary

Basis trades capitalize on price differences between cash Treasuries and Treasury futures.
The strategy involves three components: cash Treasury markets, Treasury futures markets, and repo markets.
Profit is generated from the basis spread, calculated as the price difference minus financing costs.
Key risks include rollover and margin risks, impacting profitability and market liquidity.