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Treasury Market Structure

January 14, 2021

In this episode, experts from industry, academia, and government discuss the operations of and recent stresses in the U.S. Treasury market. This market has a huge impact across the financial system—from determining the borrowing costs for governments to serving as a key benchmark within the financial system to helping to keep credit flowing to people who need it.

So when stresses emerged in recent years, many people sat up and took notice. First in September 2019, repo rates shot up by hundreds of basis points as a tax due date and a Treasury auction strained the supply of liquidity. Then in March 2020, the functioning of the Treasury market became severely stressed amid the widening pandemic.

LaSalle Street explores these episodes of volatility as well as the Treasury market’s structure, operations, and history with Lou Crandall, Chief Economist, Wrightson ICAP; Ken Garbade, author, former Senior Vice President, Money and Payments Studies, Federal Reserve Bank of New York; and Barbara Novick, Vice Chairman and co-founder, Blackrock.

Moderating the discussion is Darrell Duffie, the Adams Distinguished Professor of Management and Professor of Finance at the Graduate School of Business at Stanford University, and professor by courtesy in the university’s Department of Economics. Sam Schulhofer-Wohl, Senior Vice President and Director of Financial Policy at the Federal Reserve Bank of Chicago, provides an introduction, and Alessandro Cocco, Vice President of the Financial Markets Group at Federal Reserve Bank of Chicago, serves as host.

LaSalle Street is a podcast on derivatives markets, clearinghouses, digital currencies, financial technology, systemic stability, and other emerging issues shaping our global financial markets. It is hosted by members of the Financial Markets Group at the Chicago Fed, headquartered on LaSalle Street in the heart of Chicago’s financial district.

View transcript


On Mic

Ketan Patel

Alessandro Cocco

Vice President
Federal Reserve Bank of Chicago

Host

sam schulhofer-wohl

Sam Schulhofer-Wohl

Senior Vice President and Director of Financial Policy
Federal Reserve Bank of Chicago

Host

Darrell Duffie

Darrell Duffie

Adams Distinguished Professor of Management and Professor of Finance
Stanford University's Graduate School of Business

Guest

Kenneth Garbade

Kenneth Garbade

Retired Senior Vice President and Research Economist
Federal Reserve Bank of New York

Guest

Barbara G. Novick

Barbara G. Novick

Vice Chairman and Co-Founder
BlackRock

Guest

Lou Crandall

Lou Crandall

Chief Economist
Wrightson ICAP

Guest


Related Resources

  • Board of Governors of the Federal Reserve System, 2020, “Supervisory and regulatory actions in response to COVID-19,” webpage, Washington, DC, updated December 18, available online.
  • Board of Governors of the Federal Reserve System, 2020, Financial Stability Report, Washington, DC, November, available online.
  • Brainard, Lael, 2020, statement by Federal Reserve Governor on the Financial Stability Report, Board of Governors of the Federal Reserve System, Washington, DC, updated November 9, available online.
  • Duffie, Darrell, 2020, “Still the world’s safe haven? Redesigning the U.S. Treasury market after the COVID-19 crisis,” Brookings Institution, Hutchins Center on Fiscal & Monetary Policy, working paper, No. 62, June, available online.
  • Fleming, Michael, 2020, “Treasury market liquidity and the Federal Reserve during the COVID-19 pandemic,” Liberty Street Economics, Federal Reserve Bank of New York, blog, May 29, available online.
  • Garbade, Kenneth D., 2021, After the Accord: A History of Federal Reserve Open Market Operations, the U.S. Government Securities Market, and Treasury Debt Management from 1951 to 1979, Cambridge, UK: Cambridge University Press, forthcoming.
  • Logan, Lorie K., 2020, “Treasury market liquidity and early lessons from the pandemic shock,” remarks at Brookings–Chicago Booth Task Force on Financial Stability (TFFS) meeting, “Market Liquidity” panel, delivered via videoconference, October 23, available online.
  • Novick, Barbara, Dan Veiner, Hubert De Jesus, Daniel Mayston, Jerry Pucci, Eileen Kiely, Stephen Fisher, and Samantha DeZur, 2020, “Lessons from COVID-19: Market structure underlies interconnectedness of the financial market ecosystem,” ViewPoint, BlackRock, November, available online.
  • Quarles, Randal K., 2020, “What happened? What have we learned from it? Lessons from COVID-19 stress on the financial system,” speech by Federal Reserve Vice Chair for Supervision delivered via webcast at the Institute of International Finance, Washington, DC, October 15, available online.
  • Schulhofer-Wohl, Sam, 2020, “The influence and limits of central bank backstops,” Chicago Fed Insights, Federal Reserve Bank of Chicago, blog, August 17, available online.
  • Schulhofer-Wohl, Sam, 2019, “Understanding recent fluctuations in short-term interest rates,” Chicago Fed Letter, Federal Reserve Bank of Chicago, No. 423, available online.
  • U.S. Department of the Treasury, Board of Governors of the Federal Reserve System, Federal Reserve Bank of New York, U.S. Securities and Exchange Commission, and U.S. Commodity Futures Trading Commission, 2015, Joint Staff Report: The U.S. Treasury Market on October 15, 2014, Washington, DC, July 13, available online.

The views expressed on LaSalle Street are the speakers’ own and do not necessarily reflect the views of the Federal Reserve Bank of Chicago or the Federal Reserve System. Any links to external resources or websites are provided for informational purposes only.

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