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Hearing highlights need to bolster Treasury market resilience, review dealer rules and leverage ratio
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Summary
An unidentified speaker at a House Financial Services Committee hearing urged scrutiny of primary dealer capacity, the SEC's December 2023 central clearing rule and the supplementary leverage ratio to shore up the nearly $30 trillion U.S. Treasury market amid concerns about volatility, liquidity and rising federal debt.
An unidentified speaker at a House Financial Services Committee hearing said the nearly $30,000,000,000,000 U.S. Treasury market must be strengthened to preserve liquidity and stability for investors and taxpayers.
"With a market value of nearly $30,000,000,000,000, the US Treasury market plays a critical role in the global financial system," the speaker said, adding that the market is a benchmark for interest rates and a tool of monetary policy.
The speaker told the committee the government should examine the role of primary dealers — the largest intermediaries in the Treasury market — to ensure they have sufficient balance-sheet capacity to intermediate growing Treasury issuance and to absorb market shocks. "As the largest intermediaries, primary dealers play an important role as a connective tissue within the treasury market," the speaker said.
The opening remarks cited past episodes of stress, including October 2014, September 2019 and March 2020, and welcomed recent regulatory steps. "The central clearing rule finalized by the SEC in December '23 is an important step in that direction," the speaker said, asserting the rule "reduces risk, improves efficiency, and enhances the financial stability of the market." The speaker also called for targeted review of the supplementary leverage ratio (SLR), saying SLR reform "has the potential to assist primary dealers in holding an increasing number of treasuries."
The remarks linked market structure reforms to broader fiscal trends. The speaker noted that Treasury debt held by the public grew from about 30% of GDP in 2007 to 97% today and cited a Congressional Budget Office projection that the share could rise to about 134% by 2034. In a direct quote, the speaker referred to recent legislation as "the president's Trump's big ugly bill." The speaker emphasized that ensuring dealer capacity is "of paramount importance in improving market resilience."
The hearing proceeded after these opening remarks to receive testimony from witnesses expected to address the mechanics of dealer intermediation, the effect of capital and leverage rules on market functioning, and the interaction of regulatory reforms with fiscal trends. The speaker concluded by saying they looked forward to witnesses' perspectives and yielding back to the chair.
The hearing record shows discussion and questions on primary dealers, recent SEC rules, SLR policy and long-term Treasury issuance but does not record a committee vote or formal action in these opening remarks.
