US financial regulators proposed several steps to improve the functioning of the Treasuries market after it broke down early in the pandemic.
A task force “proposed policies to enhance the oversight of significant participants in and trading venues for the Treasury market and to centrally clear more Treasury transactions,” according to a report Thursday from the Treasury Department, the Federal Reserve Board of Governors, the New York Fed, the Securities and Exchange Commission and the Commodity Futures Trading Commission.
The interagency group also said it’s studying the potential benefits and costs of all-to-all trading in Treasuries -- where various market participants trade directly with other, avoiding the primary dealers that have historically been the middlemen for most trades. Expanding the role of non-banks would likely diminish the standing of the big dealers.
Poor Liquidity
With liquidity deteriorating amid this year’s historic Treasuries slump, investment-managers including Pimco argue the world’s largest bond market remains just as vulnerable to dislocations as it was during the chaotic days of 2020.
Regulators, academics and market participants are set to gather on Nov. 16 for an annual conference at the New York Fed on Treasury-market structure. The interagency group’s report said the gathering will feature further discussions on developments and proposals to improve market resilience.
Treasury officials at their regular quarterly refunding this month said they’re also considering releasing more data on Treasury transactions to the public.
