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Panel: Treasury Market Functioning Tied to Fed Balance Sheet, Dealer Capacity and Investor Mix
Summary
Economists and market participants told the task force that the Treasury market's resilience reflects issuance scale, dealer intermediation capacity, the Fed's balance sheet and changes in who holds U.S. debt; they recommended a package of reforms rather than single fixes.
Speakers described four related pressures on Treasury market functioning: a sharp increase in outstanding Treasury debt, reduced dealer intermediation capacity, shifts in investor composition toward more leveraged and price‑sensitive holders, and the Federal Reserve's large holdings of Treasuries.
Tom Whiff said Treasury issuance has more than doubled over the past decade and noted the Fed currently holds "more than $4,000,000,000,000 of treasuries…
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