Inside the bond market’s $800 billion ‘murder mystery.’ Here’s why the basis trade could be a time bomb—and what the Fed can do to stop it

• In normal times, hedge funds help keep money markets humming by profiting handsomely from tiny price discrepancies between Treasuries and futures linked to those bonds. When the $800 billion trade unwinds, however, the Federal Reserve may need to step in—as it did during the pandemic—to prevent the type of disastrous credit crunch exemplified by the 2008 financial crisis. 

Investors are looking to pick up the pieces after President Donald Trump announced a 90-day pause to...