After the latest Quarterly Refunding presentation by the TBAC dedicated a substantial portion of the prepared materials to the risk of a basis trade exploding, leading to catastrophic damage to the Treasury market, it should not come as a surprise that moments ago the SEC revealed that going forward hedge funds and prop trading firms that regularly trade US Treasuries – often with 20x leverage or more to greatly magnify moves as little as one basis point (here LTCM flashbacks should come flooding in)- are set to be labeled as dealers by the US regulator, a tag that will bring with it unwelcome scrutiny and attention not to mention greater compliance costs and scrutiny.


This sounds ominous …. what’s the real objective??