By the way, this is what hedge funds and insurance companies do all the time. They are big holders of bonds, especially US Treasuries. For this reason, they "loan" them out to the primary dealers (ie major banks), that use them for purposes similar to what is described here.

• The insurance company or hedge fund gets paid some interest (in addition to whatever the bond yields)

• The borrower profits by using the money to generate a return (unless it is using it for cashflow like trading houses fulfilling money market obligations)

• The primary dealer takes a small piece for facilitating the transaction.

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