 Good afternoon or still good morning depending on where you are located. I can see also L'Oriana is online. Perfect So this is the session on funding markets So the first paper is about hedge fund and the Treasury cash futures disconnect Jay Khan from the OFR will present it Please Go ahead and share your screen. So thanks very much to the organizers, Angela and to L'Oriana in advance for our discussion I'm happy to be presenting this paper today titled hedge funds and the trash treasury cash futures disconnect This is joint work with Danny Barth who's at the board of governors I'm at the OFR and so this has to come with the usual disclaimers that these views are ours and not those of our respective employers So the background of this paper is going to be in the extreme disruption treasury markets experience in March of 2020 When if we look at the figure on the left, we saw Option implied volatility in treasury markets if anything higher than it was during the financial crisis And if we look on the figure on the right We saw signs of rising illiquidity across a broad range of different maturities of treasuries And this is in terms of their bid ask spreads So during the peak of this illiquidity, we estimate that hedge funds sold over 200 billion dollars worth of treasuries And one of the things that we do in this paper is document that this is part of a broader shift as hedge fund treasury Explodes are increased by almost a trillion dollars between 2017 and 2019 If we look at the figure in the center here, we're seeing that the flows these hedge funds were doing were similar in size to more traditional flows from holders of treasuries like pension funds and banks So in this paper, we're going to be asking three questions First, why were hedge funds holding so many treasuries going into March? Second, why did they sell so many treasuries during March? And finally, what if anything, were the consequences of this for broader treasury market functioning? So what we're going to show you in this paper is that over 70 percent of this Trillion dollar change in treasury exposures can be associated with a fundamental disconnect between the cash and futures prices of treasuries And in particular that during this period treasury Futures became overvalued relative to a replicating portfolio of cash securities In order to show you that we're going to be relying on a mixture of public aggregates and some regulatory micro data to link this trade to hedge funds And in particular the trade that these guys were doing was known as the cash futures basis trade Which involves long positions and cash treasuries short positions in treasury futures and substantial borrowing in the repo market And both because of the substantial size of this trade amongst hedge funds and because of the links it forms between these crucial markets We think it's important to understanding treasury market functioning more broadly as well as money markets Now, um, you know in the full model, we're going to or in the full paper We present a model that you know explains the roles that treasuries that hedge funds were playing in broader treasury market functioning during this period Where they were serving the sort of warehouses for treasuries taking them off of the balance sheets of dealers And facilitating risk sharing with asset managers through this trade Now crucially hedge funds weren't able to act as perfect warehouses because they're exposed to two sources of risks when running this trade The first is margins on their futures contract And the second is volatility in the repo market What happened in march of 2020 is that both of these risks materialized and we find that hedge funds sold Hedge funds involved in this trade sold almost a hundred billion dollars worth of treasuries so roughly half of the total Now, uh, we're going to discuss then some of the consequences this may have had for treasury market functioning when we get there So to start with what we think was the fundamental driver of this disconnect We're going to talk about the relationship between cash and futures prices of treasuries and in principle these two things should be related I can either buy a treasury today or I can enter into a treasury futures contract today That will deliver me the treasury at some point in the future Now, uh, because the futures contract in general doesn't pay me money today Uh, the futures price and the cash price should differ by the fact that I have to wait for that Contract that eventually pay off But what we're showing you in the figure on the left here is actually that there is a convergence between these futures and cash Prices as the delivery date approaches and what our arbitrage restriction is going to impose here Is that that convergence occurs at the rate of Solely at the rate of time preference, which we're going to represent by a bill since these are both essentially risk-free Contracts so what we do in the paper is establish an empirical counterpart to this General relationship you see in the center between treasury cash and futures prices using cash prices from chrisp Futures prices from bloomberg and a whole host of rules about how these contracts settle And what we're showing you in the figure on the top right is actually The disconnect in that relationship over time in particular What we can see is that that disconnect has been increasing the blue line here has been going above the Above zero which implies that futures have been overvalued relative to Treasury cash securities Now You know an arbitrage relationship like this. It doesn't just hold by magic someone has to actually go out and trade it So in practice the way that this relationship between cash and futures prices is enforced Is through a trade known as the cash futures basis trade in particular Basis traders are going to go you know long the undervalued security. That's the cash treasury Short the undervalued security. That's a treasury futures contract and they have to make a cash out late today So they're going to meet that by substantial borrowing in the repo market In particular, they're going to borrow against the treasury for which the cash and futures prices actually converge Which is known as the cheapest to deliver treasury and it's uh that convergence we show is somewhat unique across different treasuries Now crucially instead of borrowing to the delivery date in general We find that basis traders tend to borrow largely overnight And that's going to expose this trade to one source of risk Which is the rate on those repo that they're doing might rise And they're exposed to a second source of risk through the short position On their futures contract which involves the margin calls potentially, um, which could cause a sudden cash outlay All that risk is going to be compounded by in the fact that in principle The leverage on this trade is limited only by the haircut on treasury collateral, which is 2 and would imply a leverage of 50 to 1 Now in addition to sort of laying out the risk that this trade involves we also can get a sort of stereotypical picture of what a Basis traders balance sheet should look like here. They should have large long cash positions matched short futures positions and substantial borrowing in the repo market against the cheapest to deliver to fund the trade So what we're showing you here is using some micro data from the secs form pf that To argue that the balance sheets and hedge funds actually look quite a lot like that stereotypical picture And in particular if we look at the figure on the left here We're seeing a large increase in both long and short exposures from pf That's both of which are to the tune of around 500 billion dollars Now pf mixes cash and derivatives exposure So it could be that some of these are treasury futures And so to sort that out We also include data from the cfdc's commitment of traders data And that allows us to say that the majority of these long positions are actually in cash securities Well, the majority of these short positions are actually in treasury futures And so, um, you know that helps to make this picture Match the what we think of as the stereotypical balance sheet They are indeed going along the undervalued asset and short the overvalued asset If we look at the figure on the right, we're seeing the third leg of this trade Which is they're borrowing in the repo market and we can see that that borrowing also increased during this period by about 500 billion dollars And you know, one thing that's very nice is that we can show that this net repo borrowing the hedge funds We're doing actually correlates very well with the spread between cash and futures prices that we report before Now, um, you know, all of this is aggregated statistics So, you know to dig a little deeper into this we go through and classify some hedge funds as large basis traders Based on how close they are to that story stereotypical balance sheet of a very basis trader And we find that in 2019 about 60 percent of hedge fund gross treasury exposure around 700 billion dollars Was associated with these large basis traders and basis traders made up 505 billion or 94 percent of net repo borrowing and just to put that in context especially for this Group that's focused on money markets That would make up about 30 percent of primary dealer repo lending against treasuries in the us Now another thing that's crucial to assessing the risks of this trade Are that basis traders have a median leverage about 18 to 1 and an average leverage of 21 to 1 I don't love always making comparisons to ltcm here, but you know Some back of the envelope Um calculations ltcm had to leverage about 25 to 1 So, you know, if you just take the median leverage and average leverage that we report You could believe that the average leverage or the highest leverage among basis traders was about 25 to 1 to the same size But in order to believe that you'd have to believe that roughly half of the basis traders were that levered And your alternative is to believe that there were some funds doing this trade that were substantially more levered than ltcm ever was now unfortunately the Uh statistics that form pf reports. They're all aggregated. We can't see any security level information here And so to get some more info on this trade We turn to some data that's specific to the olfar, which is our collection of data from the repo markets that actually Includes hedge funds borrowing And in particular, there are only two Repo markets in the us where hedge funds borrow. There's the unclear bilateral space and there's also a cleared Service provided by the fixed income clearing corporation known as dvp And hedge funds are allowed to participate in this through the sponsored borrowing segment of that market Now what we're using is transaction level data on that segment and we've mapped it by hand to hedge funds And it provides us a lot of detail and collateral rates and counter parties The reason that this data is particularly important to us It's not going to be too surprising to this audience is that these markets are pretty segmented In particular, there's about a 10 basis point spread between the rate that money market funds get in dvp So that's the rate they lend that and the rate of which hedge funds borrow And so that makes getting this specific data on hedge funds very important So when we look at dvp repo positions, we can actually get some more information That's consistent with large basis trading and in particular if we look at the treasuries that are deliverable into futures contracts There's a lot more volume In repo collateralized with those deliverable treasuries than in other Non-deliverable treasuries and the highest point position that we see of any Hedge fund positions during this period is actually in the cheapest to deliver treasury That's this little green dot right here that position is about 4.5 billion or about 10 percent of outstanding Which is surprising given that you know dvp repo cleared repo is only likely to be a fraction of total repo borrowing And we also see that position decrease right after the first delivery date of the Of the Futures contract which is again consistent with large basis trainings amongst treasure hedge funds Now, um, you know to put this in the context of broader treasury market functioning We present a model that i'm not going to go into detail on but i'll i'll give you some of the broad takeaways So, you know in particular the the question that we're trying to answer is what role hedge funds are playing in the market by doing this trade And what we you know come up with is that hedge funds are acting as warehouses for treasuries So in particular they're taking them off of the hands of traditional holders of treasuries and off their balance sheets Funding them through repo Markets and then eventually delivering them to the futures market So what they're doing in effect is taking them both off the balance sheets of dealers and facilitating some risk sharing on the part of Asset managers who hold the majority of long treasury futures positions in this market But crucially, you know as we pointed out this trade is exposed to risks And those risks prevent hedge funds from being perfect warehouses for treasuries So there's a very simple limits to arbitrage story here and when those Risks materialize in particular when margin constraints rise or when repo markets become tighter There can be a sudden decrease in prices as hedge funds are forced to sell off treasury positions Now, um, we find some empirical evidence that's very consistent with this This is not going to be surprising to people who have seen fleck and seen in long staff that also look at this trade from the perspective of broader financial market frictions um, but in particular it shows that the The returns on this trade Respond to frictions in the repo markets to dealers treasury exposures volatility as well as margins on these futures contracts Now, um, but uh, you know better laboratory or a more important laboratory for us is looking at what happens when this trade comes under stress And to do that, we're going to look at this episode of treasury market illiquidity in march of 2020 We've already seen some Presentations on this stuff. I'll just say that in general, you know, what seems to have happened during market 2020 Is that dealer balance sheets were already saturated with treasuries and they experienced a large dash for cash Which is, you know, increased their treasury exposure And led to a rising cost of making markets for these dealers which in turn raised volatility in the treasury market Now that increase in volatility at both direct and indirect effects on basis traders So to look at the direct effects if we look at the figure on the left here What we're showing you is the margins that were set on this contract Price changes made to a similar scale as the uh contracts On this uh as the size of the contracts for futures And we're also showing you the 95% interval for price changes over a two-year period prior to the change What we can see is that going into the Early weeks of march late weeks of february There were price movements in this contract associated with that large volatility that were actually larger than what had been seen in the previous two years Following those price movements, which actually breached the margins that the cbot sets on these contracts The uh cbot actually raised margins And we can see that happening into uh the middle of march roughly So all of that that's materializing one side of the risks on hedge funds If we look at the figure on the right, we can see some of the other side of risks And in particular, I want you to concentrate on the dvp sponsored borrowing rate And that rate is almost entirely made up of what hedge funds are Uh paying in this market We can see that you know following the decrease in the Fed funds rate There is actually a pretty sizable spike up in the sponsored borrowing rate And we'll show you in a little bit that that spike up was larger than other segments of the repo market Um, so that also means that hedge funds were experiencing some increased repo volatility during this period When these two risks materialized we find across a variety of different measures that hedge funds sold Around a hundred billion dollars worth of uh treasuries And that's just coming from the hedge funds that are actually directly doing this basis trade um Now we can also see the response of this in terms of prices So the difference between these two blue lines and this gray line is what we report as our measure of the cash futures disconnect And we can see that that was increasing during this period when volatility was high and when repo borrowing rates were also high So all of this is suggestive evidence that hedge funds Uh actually exited this trade and indeed that these arbitrage spreads that they were enforcing through this trade actually widened But it doesn't really answer the question of what this did to broader treasury market functioning And so to look at that we're going to look at the prices of the treasuries that were most closely tied to the basis trade That is the cheapest to deliver treasuries for the futures contract So what we're showing you in this panel is is two things and the figure on the left We're showing you the disconnect or the difference in prices uh between uh a Uh difference in yields between a non-deliverable treasury and a cheapest to deliver treasury um And that non-deliverable treasury that we're we're kind of constructing that based off of a simple yield curve fit On all treasuries not deliverable into futures contracts um So what you're seeing during this period is that actually the prices of treasuries most closely tied to this trade Are rising during this period of stress when hedge funds are selling a bunch of treasuries um What you're seeing in the figure on the right is a sort of cross section of that fit So in particular, we have the yield curve here as well as the yields on each individual treasury What you can see is that the increase in the prices for cheapest to deliver treasuries is somewhat unique relative to other treasuries surrounding them So all of this is suggested that despite the fact that hedge funds were offloading a bunch of these cheapest to deliver treasuries Their prices actually rose during march which implies that dealers were more willing to accept these treasuries than other non-deliverable Let's say off the run treasuries um Now we can think that this kind of makes sense, right? I mean dealers tend to pay more for treasuries that for which there's a natural source of demand and there's a lot of turnover On and cheapest to deliver treasuries certainly fit that bill um But you know one question is you know, why did they continue to pay more for that despite the fact that this trade seems to have been declining amongst hedge funds And what we think was going on here was that the federal reserve Intervened at exactly the right time in particular. They intervened it in two different ways So the first was to provide a bunch of support through the repo facility Which we think decreased the cost of carrying treasuries And especially cheapest to deliver treasuries Now if we look at the figure on the left here, we're showing you the effects of that change so all of these All of these rates are the um, the green rate is sort of the rate that hedge funds are borrowing at in this market The dark blue rate is the rate at which dealers trade and the light blue rate is the rate at which money market funds led In the panel below that down here the green Amounts are the amounts in the repo facility and the blue amounts are the amounts in the reverse repo facility So, you know, the repo facility is enforcing a ceiling on rates the reverse repo facility is enforcing it for What we can see is that there were several periods here where the Minimum bid rate on the repo facility was actually bid up beyond Uh, it's lower bound During those periods we can where repo financing was relatively scarce Which are these gray bars here We can see that repo rates were in general higher and particularly high for hedge fund borrowers The last of these periods was around march 15th or 16th At which point the fed actually increased the size of the repo facility dramatically And we can see that following that increase repo rates declined both across different dealers and for hedge funds directly The second thing that the fed did was they took the unusual step of including cheapest to deliver Treasuries in their asset purchases during this period Now what we're showing you over here is the total amount of purchases in each of those cheapest to deliver securities And what you can see is that actually these purchases were not incredibly large during the period of the most Dress for this trade which was prior to april first what we think that this Inclusion of cheapest to deliver securities did instead was that it actually gave dealers an outside option Should the trade not reemerge? They were able to actually they could have confidence that they would be able to sell it to the federal reserve So um all of this is is sort of suggesting what we think was behind dealers willingness to accept Higher prices for treasuries that hedge funds were selling more of So i'm just going to conclude. I'm not really sure how i'm doing at the time one way or the other So, you know in the wake of Doing good. All right good So in the wake of of march stress, um, you know, we've seen a lot of focus on on hedge funds holdings of treasuries We show you in this paper that a substantial amount of those holdings definitely the majority can be associated with the past futures basis trade And so this specific arbitrage trade whose return seemed to have risen during this period Was behind a lot of that uh treasury exposure by hedge funds Now, um one thing that's important about that is that the trade is exposed to two specific sources of risk margins on the futures contract as well as uh risks associated with borrowing in the repo market both of which seem to have materialized during march um along this trade hedge funds appear to uh behave as as warehouses for treasuries We're taking them off of dealers balance sheets and facilitating this risk sharing And what we saw during march seems to have been that that warehousing role was impaired but despite that impairment to the uh To the warehousing ability of hedge funds We actually find that the uh prices of cheapest to deliver securities increased which suggests that The trade may have had a limited impact on overall treasury market liquidity But that's only in the context of a large Fed intervention And so you know going forward we want to think carefully about the risks that this trade is Creating and how it necessitates a possible intervention in the future. Thanks very much Thank you. Jay. Perfect so The discussant is loriana pelizan from geife university Thank you very much, you know to uh, give me the opportunity to read this paper Is a very interesting paper Just to make clear these 100 pages of paper with 40 figures and and 10 and 10 And 10 tables. So there is really a lot and I think that Uh, Jay really did a great job in presenting, you know, the main part of the paper, but there is really a lot There is really a lot more in in the paper So what is the objective? So on one side, uh, among the different analyses is to document the evolution of us treasury future bond basis through time Not only for the period of the march 2020, but really there are some analysis that start in 1992 And investigate who are exploiting these bases and in particular they are focusing on the role of the edge funds On exploiting these bases in the recent, uh, let's say three or four years So clearly they're also trying to figure out if this is creating any issue about financial stability by focusing on the tool model, uh, that we observe in the treasury in march 2020 And I think that they are giving really a very nice perspective on What are the implications for financial stability of this type of behavior by edge funds? So the data, uh, they have a fantastic, let's say Several data they are investigating several databases because clearly the basis is involving at least three markets the treasury The repo and actually i'm talking about repos because uh, there are different type of repo market They collateralize and then collateralize The clear and unclear sorry and then the future market So clearly they're using data on not only about these three markets about price volumes and liquidity But on top of these they have also information about who are the traders in this market and pretty much How much edge funds are holding of these three markets? So this is why he's making they are able to make this paper quite unique because you know Having the possibility to look to this market In terms of you know price and volume, but also on who is trading with whom is Giving an important advantage in addressing the question that they are trying to address in these papers So the result as it has been already well presented by jay is that the basis trade becomes popular among edge funds pretty much after the 2016 and uh Among the other things that they are showing is that pretty much the basis trade is one of the reason of the Cheapest deliver premium that is has not been presented But clearly is also another interesting result of the paper And the basis trade is subject to treasury market liquid risk future marketing course and reporoll over risk and clearly all these three aspects in march 2020 May in some sense have been materialized but What is also interesting in this paper is that they show that the unwinding of the basis by edge funds Seems not having strongly contributed to the stress Actually, it is the consequence of the strategy observed, but the edge funds and their trading on the basis Were not the cause of the stress and this is also I think is one of the important results Of this paper. So it's showing to us that clearly this The edge funds do trade a lot the basis they were unwinding during the march 2020, but Maybe because of the intervention of the fed at the end. It doesn't seem that they were really the one trading at the beginning this Let's say the problem of the turmoil that you observed in march 2020. We cannot exclude that if the fed Didn't intervene This basis trade may blow up and create Systemic risk, but so far this is not what we observe and they are able to document this And I think that is quite credible So as I say Even if it is a very It is a preliminary paper. It is extremely interesting And there is really a lot of studies a lot of analysis a lot of results to to be honest It's still difficult to digest And clearly it needs to be more focused and I think that the already as you can see from the from the presentation They also are already going on the right path from this point of view But clearly I have several questions. The first one is clearly The basis trade becomes popular among edge funds. This is what they document mostly in 2016 17 and so on And one question that they have in general is is it good or bad? you know Pretty much They are not the one that generate these bases from 2016 Actually, if they are playing a role in the market apart from the turmoil that then we can discuss Is that they have a positive role? They are the arbitrageers and they prevent this this connection among these two markets future and cash Is becoming even bigger So, you know, I think really that we need to consider the edge funds and the play the role that they play on the basis At least for the period before the March 2020 as those that in some sense prevent this this connection to become even bigger and maybe you know It would be nice that this aspect is is stress a little bit more And we need to ask to ourselves if this role has not been played by edge funds What should be the others that play this role because clearly there are market forces that create this disconnection And edge funds are not the one creating this disconnection. So Maybe take it a general perspective and recognize the role of the edge funds in really reducing this disconnection should be important You know in the paper there are these these figure that already shows this Let's say this increase In the basis mostly in the last part of the sample Actually, this is calculated with this the second to deliver contract and I wonder why but anyway There is this huge increase in the open interest position Largely documented by the paper that this open interest position has been taken by On one side some long-term investors on the other side by By edge funds, but really the first mover are not the edge funds the first mover are the other long-term investors that want to take position on the interest rate treasury interest rate And the edge funds on one side provide the liquidity to the future market And on the other side, you know, they are taking this open interest position. So clearly They are really the consequence of this type of behavior not the cause and so, you know, since it means that they are the consequence and There are several other reasons why these basis has been increased long-term investors supplementary leverage ratio in some sense You know, we need really to ask ourselves If the basis were also present before because this is what this graph is showing, you know Also in terms of size is what quite similar to the one that we observed in 2019 2020 It was very large in 2016 And maybe it was also present in 2012 to 2013 Both for the two year and also for the five years. So I think that The question is why edge funds started in 2016 the basis were present even before the size was similar Why they're not we're not exploiting it before and And if this is not the case, you know, who kept the basis more before the 2016 and then Uh, you know, the edge funds came in maybe some other primary dealer that now have the Supplementary leverage ratio But still it seemed that it wasn't that because, you know, the basis were present even before So what is going here? I think that if you want really to have a paper that try to explain These basis and how is moving we need to have As they are doing in the paper a long term perspective So look for a long period not just to try to explain only one single event And try to give a broad View and this is exactly what I think it will be interesting to observe That is, you know, who are the agents that push the market Versus the disconnection through time And the paper clearly is very investigating the basis from 1922 till 2020 Do we need different theories to explain The different times where the basics spike up to be positive some cases negative And can we have a unique unified theory that is able to explain, you know, it in the equal way through time because, you know We do have the LTCF that create this that varies on sense Trying to exploit this large basis also in 1997 1996 and then blow up in 1998 So is it the same story? Is it a different story from my point of view, you know We have that the story that can explain all this disconnection is that There are some reasons why there is a huge Let's say difference in the demand or it is supply in the two markets Future of treasury these large demand or supply Can be both in one market, but not in the other. This is the key point So this is the first mover and then Clearly there are the arbitrage that try to connect these two markets, but this arbitrage is not really A risk free art is not an arbitrage actually at the end because you need to take roll over this margin call And this is something that we know for decades. This was the problem that LTCM faces And you know, for example, I have a paper that in Europe we have a similar problem Where the mispricing has been created by the QE Uh of the central bank So, you know, the fact is that there are some time where there is this disconnection because there is some trade Only in one of these markets and not in the other and the arbitrage do not have the capacity Or do have the capacity but still the disconnection remains because you have these two risks The repo cost the roll over risk of the repo cost and the margin call so You have a model that try to explain this in general And it will be nice to see this is the only reason of why we have this type of disconnection or There is some other story Going back instead on on the case that you are presenting that is the march 2020 You know, there is this graph in your uh in your paper among the different figure That is you know, in some sense possibly the How pretty much this hedge funds has to face the risk during the march 2020 because as you can see the price Initially increased and they were short on on the future. So they were losing on the future side Then the market Fresh and they are losing on the bond side. So, you know, the question is What's happened really to to this uh, uh from the point of view of the of the basis Which of these two events where the the one creating more problem to them The increase in the price so on the future side or the reduction in the price on the cash side and I think, you know that In some sense what the market faces in that case it was a flight to safety at the beginning and then a flight to cash clearly they have intervened at the flight to cash to prevent A larger reduction in the price But there was also a rolling up in the price before and the hedge funds clearly Trading the basis face the risk on both sides. So during the flight To cash the hedge fund the hedge fund trading the base might have help on one side, you know They were short on the future position and they are earning on the And they're in the earning in this case because you know When there is the cash the crash Having a sharp position on on the future where helping them to make money So, you know I think that you should investigate even if it is few days these two events They fly to safety and they fly to cash Separate maybe by looking to more high frequency data and then try to serially Uh, what was the role because from my point of view at least For some fraction of of the turmoil. They were providing the market. They were actually not the one That can create financial instability. They were helping the market So it would be nice to see better. What was really the role of hedge funds and You know, you are having this policy implication That uh, you know, the the intervention of the Fed prevent that the uh, the position of the hedge funds in the basis Might have created a lot of financial instability Uh, but to be honest, it is not clear to me if the solution For the uh, risk that the basis trade is creating Should be really that the central bank has become the market maker of last resort We need to think how to eliminate this a sense this friction and allow the arbitrager to do their work But, you know, we shouldn't all the time to ask for the intervention of the central bank, you know, uh Clearly this is not an arbitrage a risk free arbitrage The arbitrager trading these bases are carrying risk. They're rolling over risk the liquid risk and the margin call so clearly You know, why we are not trying to eliminate the uh, the rollover risk by having a more long term people market Why why is not present so far? This is the type of question we need to ask And why not centrally clear and let the position both of the future market and the repo market This will eliminate completely the risk We will let that the market is efficient and the two market will be less disconnected So trying to address also this type of of issue will tell us how to address the problem and avoid that All the problems we have in the market Are solved by the central bank uh Then I have clearly several other point that maybe we can discuss Yes, if you could wrap up and Yes, so, you know, there are clearly Some issue about the regression that's been done And also, you know, the model is interesting. I have a lot of other questions regarding the model But I prefer not to spend time given that also you didn't spend time on On the model, but clearly it is a very interesting paper I'm learning a lot to be honest. I have a lot of other questions After reading 100 pages of the paper, but uh, you know, in any case very good job and a lot you did a great Uh, you you did you did spend a lot of time. I can imagine a lot of work in Developing on this type of analysis. Thank you very much. Thank you very much. Diana. So first, I would like to give today the possibility to respond I mean, I made a lot of points. So maybe I'm The big ones, uh, thank you for going through the paper. I know it's a little bit Disorganized and we are working on that um, you know in terms of I think there's a very good point here. First of all on on the central bank interventions and also on the sort of What what value are the hedge funds providing to this trade? Why is it? Let's say Are they playing a useful role here? Right? I think that it is absolutely the case that The presence of these large You know arbitrage spreads has to do with a broader treasury market structure, right? And I think that it is a I think that we have wanted to point out is essentially that It's not that hedge funds decided to take Massive levered positions out of nowhere. They did it because the treasury market structure was set up in a certain way and you know, I think You're exactly right that a straightforward policy response is to address the treasury market structure and not to just Allow hedge funds to build up these positions and then get ready to bail them out every time. Excuse me Not that but provide support When they when they get into trouble um, so I I think that's all, uh Completely true. I think that you know Um netting across futures and repo markets, for instance is is a would be a big step to eliminating these spreads um, it wouldn't necessarily eliminate risk Because you know, then we have some risk between the two you know between say cme and and thick on the other side that they now have to um Net out so that's that's a possibility But but it it's still the case that it seems like a good first step Um as does increasing, you know the scope of central clearing that might also have a big effect here um So, yeah, I think all of that is very true. I'm trying to see if I I'm sure I have missed Something oh who should play the role of hedge funds don't It's a great question We've been thinking a lot of this in terms of banks being the alternative And you know the reason we've been thinking of that is sort of There's an element of this. It's classic maturity or liquidity transformation that you think should be the realm of traditional banks or dealers um, the fact that they haven't been doing that liquidity transformation may have to do with you know Let's say changes in regulation or other frictions in the treasury market that have increased over time And the unfortunate thing is we don't we don't know what the the shape of the ownership Of you know treasury futures or cash positions like our hedge fund data starts in 2013 Uh the commitment of traders data us. I don't remember when it starts, but it definitely I don't believe goes back to 1992 So, you know, we have a limited window and we can set up a model that sort of makes sense of treasury market structure as of 2019 But I don't think that we can apply it equally to all all dates Uh, and I agree that you know I agree that I want to apply it to more places and make a more stable Structure here and especially explain the rise in this which we think is either coming from the fact that You know cash treasuries are becoming harder to hold on balance sheets Or because you know the other side the futures side has more demand for that Off-balancing exposure from the contract But you know, we haven't found a way to make a very good causal statement on which one of those was important and by how much and I think making that statement would be A great thing to do. I'm not sure that we're going to be able to do it in this paper by itself Um, especially since it would increase the page count, which would you know, uh, I think Give my co-author uh nightmares. So, you know, uh, but in any case, I hope I got most of it Uh, thank you very much for that discussion. It was it was great. So Thank you, Jay. Okay. Uh, we're a bit late, but I want to give to whoever has A question that would like to ask The possibility to intervene. I don't see anything in the chat But if you have a question that would like to Ask this question directly if you can Okay, maybe not So then thank you very much Jay. Thank you very much Loreana