The Treasury Market May Be So Big That the Fed Can’t Step Away
- ‘Sheer volume’ may require support in times of stress: Quarles
- Market now exceeds $20 trillion amid swelling U.S. deficits
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The Treasury market is now so large that the U.S. central bank may have to continue to be involved to keep it functioning properly, according to Federal Reserve Vice Chair for Supervision Randal Quarles.
The U.S. rates market has faced several significant dislocations in the past couple of years, most notably in March, when the pandemic roiled global assets. In response, the Fed has expanded the toolkit it uses to help ensure market stability, including the implementation of new repurchase-operation facilities and swap lines. It also restarted direct purchases in the bond market, and is still buying about $80 billion of Treasuries a month.