Basis-trade crowding returns as the futures curve steepens

Annualised carry on three-month regulated futures has widened into double digits for the first time this year, restoring the economics of the cash-and-carry trade that dominated positioning in the last cycle.

Fund administrators say allocations have followed. Several multi-strategy managers have re-opened dedicated sleeves for the trade after shutting them when carry compressed toward the risk-free rate.

The mechanics are simple and the risk is not. A fund buys spot exposure, sells the future, and harvests convergence — but must post and maintain margin against the short leg. A rapid spot rally forces margin calls at exactly the moment the spot leg is hardest to monetise intraday.

Exchange margin regimes have tightened since the last unwind, and more of the trade now sits with regulated clearing rather than offshore venues. That reduces counterparty risk without changing the crowding dynamic.

Two prime brokers said they have raised haircuts on the structure pre-emptively, a sign the sell side remembers how quickly convergence trades stop converging.