US TSYS: Who Is Going To Buy Them ?
May-26 01:41
Treasury Secretary Scott Bessent says US regulators may ease the supplementary leverage ratio (SLR) rule this summer, which could encourage banks to boost their Treasury holdings and reduce US Treasury yields.
- Bloomberg - “We are very close to moving” on the so-called supplementary leverage ratio, Bessent said on Bloomberg Television’s Wall Street Week.”
- “Banks have argued the rule, which requires them to hold capital when they trade against their investments in Treasuries, crimps their ability to add to those securities in stressful times, as they are treated in line with much riskier assets. Loosening the rule would encourage them to boost holdings.”
- Changing the SLR is 1 of the tools the Fed has to get US banks to be able to increase their holdings of US bonds.
- Lyn Alden on X : “That's one of the levers they can pull to let banks eat more bonds. It has QE-like effects; positive for liquidity. https://x.com/LynAldenContact/status/1925951076538179967”
- The US bond market is pretty short and leaning quite bearish so should we see something of this nature come to fruition it could have a knee-jerk response lower in yields.
- U.S. Treasury Secretary Scott Bessent told Bloomberg on Friday that the world's largest economy is "going big" on digital assets.
- “The US Treasury could experience a surge in demand for government debt from the digital asset sector, potentially reaching $2 trillion over the next several years, according to Treasury Secretary Scott Bessent. https://news.bitcoin.com/bessent-biden-starved-crypto-trumps-plan-could-flood-treasuries-with-trillions/”
- WSJ - “Big banks including JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo are teaming up to launch a shared crypto stablecoin. https://www.reuters.com/business/finance/some-us-banks-explore-venturing-into-crypto-with-joint-stablecoin-wsj-reports-2025-05-23/”
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US TSYS: Extraordinary Measures And Cash Look Sufficient To Head Off X-Date
Apr-25 20:32
Treasury has about $164B in "extraordinary measures" available as of April 23 to avoid hitting the debt limit, per its regular report out Friday. That's out of a maximum total of $375B (they have used $211B).
- With Treasury cash looking healthy (around $600B), that's a fair amount of dry powder to get through the summer months to wait out the debt limit impasse. Tax receipts have looked strong with tariff revenues also starting to boost cash flows, further reducing the near-term urgency to adjust bond issuance.
- This has also helped push back analyst “x-date” expectations to later in the summer/September. We expect to hear from Treasury about its own x-date assumptions next week.
US TSYS: Treasury Market Trading Stayed Orderly In April: Fed Report
Apr-25 20:25
Liquidity across financial markets including the Treasury market deteriorated after President Trump's April 2 reciprocal tariffs announcement but market functioning was generally orderly, according to the Federal Reserve's semiannual report on financial stability, released Friday. (PDF link is here)
- Treasury market liquidity has been poor for years and yields were particularly volatile in early April, contributing to a deterioration in market liquidity, the Fed said.
- Nevertheless "trading remained orderly, and markets continued to function without serious disruption," according to the report, which looked at information available as of April 11.
FED: Ex-Gov Warsh: Fed Has Failed To Satisfy Price Stability Remit
Apr-25 20:22
From our Washington Policy Team - Some fairly sharp words today from ex-Fed Governor Warsh on the central bank (who for what it's worth is seen by betting markets as by far the frontrunner for the next Fed Chair):
- The best way for the Federal Reserve to safeguard its independence is for policymakers to avoid expanding the institution's role over time, including wading into policy areas that are outside its core mission, former Fed Governor Kevin Warsh, a leading contender to replace Jerome Powell as chair next year, said Friday.
- "I strongly believe in the operational independence of monetary policy as a wise political economy decision. And I believe that Fed independence is chiefly up to the Fed," Warsh said in a speech at a Group of Thirty event on the sidelines of the IMF meetings. "Institutional drift has coincided with the Fed’s failure to satisfy an essential part of its statutory remit, price stability. It has also contributed to an explosion of federal spending." His speech made no mention of Trump's tariffs or the appropriate monetary policy to deal with them.
- He said the ideas of data dependence and forward guidance widely adopted by Fed officials are not especially useful and might even be counterproductive.
"We should care little about two numbers to the right of the decimal point in the latest government release. Breathlessly awaiting trailing data from stale national accounts -- subject to significant, subsequent revision -- is evidence of false precision and analytic complacency," he said.
"Near-term forecasting is another distracting Fed preoccupation. Economists are not immune to the frailties of human nature. Once policymakers reveal their economic forecast, they can become prisoners of their own words. Fed leaders would be well-served to skip opportunities to share their latest musings."
