How the government got hedge funded

Planet Money

NPR

Business, News

4.6 • 29.8K Ratings

🗓️ 10 October 2025

⏱️ 28 minutes

🔗️ Recording | iTunes | RSS

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Summary

The U.S. government spends a ton of money, on everything from Medicare to roads to defense. In fact, it spends way more than it takes in. So…it borrows money, in the bond market. By selling U.S. Treasurys, basically IOUs with periodic interest payments. And for decades, people have loved to invest in Treasurys, for their safety and security.

But lately, Treasurys have started to look riskier.

In part because, in recent years, there’s a new buyer at the table: hedge funds, those loosely-regulated financial companies that invest on behalf of institutions and wealthy clients. They have started doing a special trade called the “Treasury basis trade.” And, depending on who you talk to, this trade could destabilize our entire financial system. Or help the U.S. government borrow more money. Or both.

On the latest episode: how and why are hedge funds getting into Treasurys? We follow how a Treasury travels from the nest into the hands of hedge funds. And we speak to someone from one of those hedge funds, about what they’re doing and why.

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This episode was hosted by Mary Childs and Kenny Malone. It was produced by Willa Rubin and edited by Marianne McCune. It was fact-checked by Sierra Juarez and engineered by Jimmy Keeley and Cena Loffredo. Alex Goldmark is our Executive Producer.

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Transcript

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0:00.0	This message comes from The Economist. Introducing The Economist Insider, a new video offering with twice-weekly shows featuring in-depth analysis and expertise to make sense of an increasingly complex and dangerous world. More at Economist.com slash insider.
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1:01.2	This is Planet Money from NPR.
1:10.3	There is a basic mismatch between how much our government takes in in revenue, mostly in taxes,
1:17.9	and what it spends on defense and Medicare and roads and that sort of thing.
1:23.0	And the reason we can sustain that structural mismatch is because we can borrow the difference.
1:29.2	We go get the money we need in the big international bond market, where people and institutions
1:34.9	with money lend it out to people and institutions who want money in exchange for periodic
1:40.4	interest payments.
1:41.5	The U.S. government's promise to pay back what it borrows plus interest, that is a treasury.
1:48.2	It's an IOU.
1:49.1	And all over the world, there are people and institutions who want to loan the U.S. government money,
1:54.4	in part because it is perceived to be such a safe bet.
	...

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