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Hedge Fund Leverage Breaks Tembus Rekor $3.4 Trillion, Increasing Risk of Pressure in the US Bond Market

Short-term financing activity by hedge funds in the US bond market has reached a new record high.
The value of repo borrowing now exceeds about $3.4 trillion, more than triple since 2019. Repo itself is a financing scheme in which hedge funds pledge government bonds or Treasuries to obtain cash and expand their investment positions.
In addition, financing via prime brokerage has also surged to $3.2 trillion, or double since 2022. This scheme involves direct loans from large banks to increase market exposure.
Data from Apollo Global Management shows that hedge funds now control about 8% of the total US government bond market, valued at around $31 trillion, up from just 3% in 2021.
This increase in leverage reflects the growing role of hedge funds in shaping global bond market dynamics.
However, this situation also brings risks. If borrowing costs suddenly rise or market volatility increases, hedge funds may be forced to rapidly unwind their positions.
Such a scenario could trigger a large-scale sell-off in the Treasury market, potentially causing systemic pressure similar to what occurred during the 2020 liquidity crisis.
With high leverage positions, hedge funds have become one of the main factors influencing the stability of the US bond market.
This development indicates that risks in financial markets do not come only from fundamental factors, but also from the financing structures and leverage used by market participants.