Hedge funds are backing a US Securities and Exchange Commission proposal to ease restrictions on trading European Union bond futures, potentially opening new opportunities for fixed income arbitrage and risk management strategies, according to a report by Bloomberg.

The Managed Funds Association (MFA), which represents the alternative asset management industry, has urged the SEC to add the EU to its list of exempted bond issuers. The change would allow US investors to trade EU debt futures under Commodity Futures Trading Commission oversight, removing regulatory barriers that currently restrict access to the contracts.

The proposal has also received support from Deutsche Börse's Eurex and the Futures Industry Association. Eurex, which launched EU bond futures in 2025, said existing rules have effectively prevented many US market participants from trading the products, contributing to limited liquidity.

Trading activity remains subdued, with Eurex's EU bond futures averaging just over 40 contracts per day across the past 20 sessions, compared with more than 2 million contracts traded on some days in German 10-year government bond futures.

Greater US participation could support liquidity and create new opportunities for hedge funds employing cash-futures basis trades and relative-value strategies. Eurex has highlighted the potential for arbitrage between EU and individual sovereign bond markets, while the contracts could also provide more precise hedging tools for investors holding EU debt.

The proposed exemption would mark the first addition to the SEC's list of exempted issuers since 1999, supporting broader efforts to develop the EU's joint debt market into a more liquid alternative to major European sovereign bond markets.