US Rates Strategy: Basis Trading Comes On-Screen

Research evidence excerpt

US Rates Strategy: Basis Trading Comes On-Screen

Idea

July 16, 2026 10:00 AM GMT

Morgan Stanley & Co. LLCMUS Rates Strategy | North America Eli P Carter

Strategist

Basis Trading Comes On-Screen Eli.Carter@morganstanley.comMatthew Hornbach +1 212 761-4703

Matthew.Hornbach@morganstanley.com +1 212 761-1837

CME’s Treasury Link will package OTR Treasuries and futures in Martin W Tobias, CFA

one electronic spread, reducing legging risk and broadening StrategistMartin.Tobias@morganstanley.com +1 212 761-6076

access. Its impact will depend on how OTR liquidity develops Shaun Zhou

and how users manage OTR-to-CTD risk, suggesting only Shaun.Zhou@morganstanley.com +1 212 761-3348

modest near-term pressure on basis returns. Aryaman Singh

Aryaman@morganstanley.com +1 212 761-1993

Key Takeaways

Treasury Link packages OTR cash Treasuries and futures in one electronic spread,

lowering execution hurdles for basis-style trades and new entrants.

Atomic execution reduces the directional risk of legging, but traders may still

favor separate legs for price improvement or EFPs for negotiated size.

Adoption will depend on how OTR liquidity develops, as typical institutional basis

trades may require execution across multiple price levels or added depth.

As OTRs are rarely CTD, even DV01-matched packages can leave residual

duration risk that may require a follow-on switch trade to align the hedge.

Treasury Link should improve basis access and transparency, but near-term

volume migration and basis compression should be modest.

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