The repo market, a $22tn global short‑term collateralized lending system, has seen hedge funds dominate borrowing over the past decade. According to a new NY Fed report, hedge fund repo borrowing nearly tripled since October 2022, reaching $3tn by January 2026, dwarfing their $1.3tn in lending. While traditional lenders include money market funds, banks, and foreign bank branches (FBOs), the data suggests hedge funds now account for most of the market’s growth. This surge, driven by increased use of non‑Treasury collateral, forced the Federal Reserve to expand its balance sheet last year to maintain stability. Analysts warn that the opacity of repo—estimated at $16tn in government bond‑backed repos in 2024—makes regulation challenging, yet the central bank may need to address the leverage buildup to prevent future jitters.

The NY Fed’s findings highlight a striking shift: hedge funds, once modest participants, now represent the lion’s share of repo borrowing, reshaping the short‑term debt landscape and prompting concerns about systemic risk.