Suchergebnisse

Modern money and capital markets are not free-form bazaars where participants are left alone to contract as they choose, but rather are circumscribed by a variety of statutes, regulations, and behavioral norms. This paper examines the circumstances surrounding the introduction of a set of norms recommended by the Treasury Market Practices Group (TMPG) and pertinent to trading in U.S. government securities. The TMPG is a voluntary association of market participants that does not have any direct or indirect statutory authority; its recommendations do not have the force of law. The recommendations do, however, carry the cachet of respected market participants and are targeted to behaviors that are widely acknowledged to impinge on market liquidity and that risk damaging the reputation of the market.

The Term Securities Lending Facility (TSLF) was introduced by the Federal Reserve to promote liquidity in the financing markets for Treasury and other collateral. We evaluate one aspect of the program - the extent to which it has narrowed repo spreads between Treasury collateral and less liquid collateral. We find that TSLF operations have precipitated a significant narrowing of repo spreads. More refined tests indicate the market conditions and types of operations associated with the program's effectiveness. Various additional tests, including a split-sample test, suggest that our findings are robust.

In March 2020, the economic disruptions associated with the COVID-19 pandemic prompted a global dash for cash by investors. This selling pressure occurred across advanced-economy sovereign bond markets and caused a deterioration in market functioning, leading to central bank interventions. The authors show that these market disruptions occurred disproportionately in the U.S. Treasury market and were due to investors' selling pressures being far more pronounced and broad-based. Furthermore, the authors assess differences in key drivers of the market disruptions across sovereign bond markets, based on an analysis of the data as well as outreach to a range of market participants.