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If only we could hedge against hedge fund risk.

The Bank for International Settlements (BIS), a cooperative organization of 63 global central banks, warned in its quarterly report on Monday about the troubling rise of the so-called basis trade, in which hedge funds seek to profit off marginal differences between the prices of Treasury bonds and their facsimiles in futures markets. It's just the latest red flag raised by regulatory bodies about hedge funds' recent dalliances in the bond market.

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Source Fool.com