Yellen Worries Over Lack of ‘Satisfactory Liquidity’ in Treasuries
(Bloomberg) — Treasury Secretary Janet Yellen cited considerations in regards to the potential for a breakdown in buying and selling of US Treasuries, as her division leads an effort to shore up that essential market.
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“We’re apprehensive a few lack of enough liquidity out there,” Yellen mentioned Wednesday in answering questions following a speech in Washington. The balance-sheet capability of broker-dealers to interact in Treasuries market-making hasn’t expanded a lot, whereas the general provide of Treasuries has climbed, she famous.
Treasury debt excellent has climbed by about $7 trillion because the finish of 2019. However huge monetary establishments haven’t been as keen to function market-makers, burdened by the so-called supplementary leverage ratio, or SLR, which requires that capital be put in opposition to such exercise, in addition to in opposition to reserve holdings.
Yellen famous that the Federal Reserve now has a standing repurchase facility to offer a liquidity backstop to the Treasuries market; that “may be useful,” she mentioned. She additionally mentioned that the so-called Group of 30 panel has offered some “good concepts” on reforms that might assist strengthen the market, together with the potential enlargement of central clearing.
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