Dealer capacity and U.S. treasury market functionality

Darrell Duffie, Michael Fleming, Frank Keane, Claire Nelson, Or Shachar, Peter Van Tassel

We show a significant loss in U.S. Treasury market functionality when intensive use of dealer balance sheets is needed to intermediate bond markets, as in March 2020. Although yield volatility explains most of the variation in Treasury market liquidity over time, when dealer balance sheet utilization reaches sufficiently high levels, liquidity is much worse than predicted by yield volatility alone. This is consistent with the existence of occasionally binding constraints on the intermediation capacity of bond markets.

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Year of publication:	[2023] ; Revised October 2023
Authors:	Duffie, Darrell ; Fleming, Michael J. ; Keane, Frank ; Nelson, Claire ; Shachar, Or ; Van Tassel, Peter
Publisher:	[New York, NY] : Federal Reserve Bank of New York
Subject:	Treasury market \| liquidity \| volatility \| dealer intermediation \| value-at-risk \| USA \| United States \| Staatspapier \| Government securities \| Liquidität \| Liquidity \| Volatilität \| Volatility \| Börsenmakler \| Stockbrokers \| Öffentliche Anleihe \| Public bond \| Marktliquidität \| Market liquidity \| Finanzmarkt \| Financial market \| Risikomaß \| Risk measure

Extent:	1 Online-Ressource (circa 70 Seiten) Illustrationen
Series:	Staff reports / Federal Reserve Bank of New York. - New York, NY : [Verlag nicht ermittelbar], ZDB-ID 2189304-4. - Vol. no. 1070 (August 2023)
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Graue Literatur ; Non-commercial literature ; Arbeitspapier ; Working Paper
Language:	English
Other identifiers:	10.59576/sr.1070 [DOI] hdl:10419/284030 [Handle]
Classification:	G01 - Financial Crises ; G1 - General Financial Markets ; G12 - Asset Pricing ; G18 - Government Policy and Regulation ; E58 - Central Banks and Their Policies
Source:	ECONIS - Online Catalogue of the ZBW

Persistent link: https://www.econbiz.de/10014393396