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(Bloomberg) — US financial regulators proposed several steps to improve the functioning of the Treasuries market after it broke down early in the pandemic.
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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.
More insights on regulators thoughts and possible actions ahead are set to be garnered when they gather next week at an annual conference on the Treasury market.
Pimco Says Let Investors Trade Treasuries With Each Other
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 confab 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.
In a report last month on the prospect of all-to-all trading in Treasuries, New York Fed researchers acknowledged that dealers might “choose not to participate” if the current market structure is more profitable.
As for customers, at least some are “hesitant or unmotivated to transact more in all-to-all trading venues” because dealers are “considered particularly important for facilitating large trades in less liquid securities,” as well as for financing and information about market conditions, the report said.
Treasury officials at their regular quarterly refunding this month also said they’re also considering releasing more data on Treasury transactions to the public.
Treasury Traders Get Rare Chance to Speak Up on How Market Works
–With assistance from Elizabeth Stanton.
(Adds New York Fed report on all-to-all trading.)
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Image and article originally from ca.finance.yahoo.com. Read the original article here.