Hedge funds have increasingly entered the U.S. Treasury market, stepping in after banks pulled back post-2008. They engage in the 'Treasury basis trade,' borrowing from money-market funds to buy Treasurys while hedging with futures, profiting from small yield gaps. This leveraged strategy, now worth around $800 billion, enhances market liquidity but introduces systemic risk. A sudden shock—like the 2020 pandemic sell-off—could trigger a rush for cash, collapsing collateral values and forcing central bank intervention. Regulators worry that reliance on lightly regulated hedge funds creates moral hazard, with firms potentially taking excessive risks expecting bailouts. While these actors help finance massive government debt, their role raises urgent questions about financial stability, oversight, and who ultimately bears the risk when the system wobbles.