The risk, they have warned, is that large basis positions could once again exacerbate vulnerabilities in the U.S. bond market, which is a linchpin of the world's financial system. "These basis positions with these transformations are going to be a part of the equation because it's a necessary evil to get the capital to meet the demand." Higher supply comes as liquidity in Treasuries has been problematic for most of last year, partially due to rising volatility spurred by the Fed's aggressive rate hiking cycle. But Richard Chambers, global head of repo trading and global co-head of short macro trading at Goldman Sachs, told the trading forum on Thursday that the repo market was now more efficient. "We will have more levered investors buying Treasuries into 2024 and so demand for leverage in Treasuries will increase," he said.

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Persons: Dado Ruvic, Joe Biden, Janet, Yellen, Jason Granet, Mark Wendland, ”, Richard Chambers, Goldman Sachs, Davide Barbuscia, Gertrude Chavez, Dreyfuss, Carolina Mandl, Laura Matthews, Matthew Lewis Organizations: REUTERS, Federal Reserve, Bank for International Settlements, Treasuries, Treasury, BNY Mellon, DRW Holdings, Reuters, Goldman, Thomson Locations: U.S, New York, Treasuries