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Discussion Paper
Breaking Down TRACE Volumes Further
This joint FEDS Note and Liberty Street Economics blog post from staff at the Board of Governors and the Federal Reserve Bank of New York aims to share further initial insights on Treasury cash transactions reported in the Financial Industry Regulatory Authority (FINRA)’s Trace Reporting and Compliance Engine (TRACE).
Discussion Paper
Unlocking the Treasury Market through TRACE
This joint FEDS Note and Liberty Street Economics blog post from staff at the Board of Governors and Federal Reserve Bank of New York aims to share initial insights on the Treasury cash transactions data reported to Financial Industry Regulatory Authority (FINRA)'s Trade Reporting and Compliance Engine (TRACE).
Journal Article
The Long and Short of It: The Post-Crisis Corporate CDS Market
The authors establish key stylized facts about the post-crisis evolution of trading and pricing of credit default swaps. Using supervisory contract-level data, they show that dealers became net buyers of credit protection starting in the second half of 2014, both through reducing the amount of protection they sell in the single-name market and switching to buying protection in the index market. More generally, they argue that considering simultaneous positions in different types of credit derivatives is crucial for understanding institutions’ decisions to participate in these markets and ...
Journal Article
The Primary and Secondary Corporate Credit Facilities
The Federal Reserve introduced the Primary Market Corporate Credit Facility (PMCCF) and the Secondary Market Corporate Credit Facility (SMCCF) in response to the severe disruptions in corporate bond markets triggered by the COVID-19 pandemic and subsequent economic shutdowns. The Corporate Credit Facilities (CCFs) were designed to work together to restore functioning of credit markets, with an overarching goal of facilitating credit provision to the nonfinancial corporate sector of the U.S. economy. This article provides an overview of the CCFs, detailing the facilities’ design, documenting ...
Journal Article
The Municipal Liquidity Facility
At the onset of the COVID-19 pandemic, state and local governments were among the sectors expected to experience the most severe distress. The combination of a sharply deteriorating revenue picture, a pressing need for additional expenditures, delays in the receipt of substantial taxes owed, and an inability to access the financial markets raised serious concerns among many observers about the ability of state and local governments to meet their public service delivery responsibilities. In April 2020, the Federal Reserve announced the establishment of the Municipal Liquidity Facility (MLF) to ...
Discussion Paper
The Fed’s Treasury Purchase Prices During the Pandemic
In March 2020, the Federal Reserve commenced purchases of U.S. Treasury securities to address the market disruptions caused by the pandemic. This post assesses the execution quality of those purchases by comparing the Fed’s purchase prices to contemporaneous market prices. Although past work has considered this question in the context of earlier asset purchases, the market dysfunction spurred by the pandemic means that execution quality at that time may have differed. Indeed, we find that the Fed’s execution quality was unusually good in 2020 in that the Fed bought Treasuries at prices ...
Discussion Paper
End‑of‑Month Activity Across the Treasury Market
In a 2024 post, we showed that interdealer trading in benchmark U.S. Treasury notes and bonds concentrates on the last trading day of the month, likely due to passive investment funds’ turn-of-month portfolio rebalancing. In this post, we extend our trading activity analysis to the full range of Treasury securities and market segments. We find that trading is even more concentrated on the last trading day of the month for other types of Treasury securities and in the dealer-to-customer segment of the market, with trading volume in off-the-run Treasuries twice as high as on other days, on ...
Discussion Paper
Liquidity Fades as Treasuries Age
More than $30 trillion U.S. Treasury debt is outstanding. Less than 4 percent of this amount, which is associated with the most recently issued Treasuries, called on-the-run securities, accounts for 65 percent of average daily trading volume. The remaining portion of the amount outstanding is accounted for by seasoned issues that have been replaced by newer benchmarks, which are referred to as off-the-run securities. In this post, we review the key results in our paper that uses transaction-level Treasury TRACE data to study how trading activity and liquidity evolve as securities move from ...
Discussion Paper
Stripping STRIPs Trading Activity
In March 2020, the Financial Industry Regulatory Authority (FINRA) began reporting aggregate trading volume for securities issued by the U.S. Treasury Department. The public data do not, however, include information about the trading activity of Separate Trading of Registered Interest and Principal of Securities (STRIPS). STRIPS are created from existing Treasury securities and offer risk management benefits, yield curve insights, and investment opportunities for a diverse range of market participants. In this post, we provide the first detailed analysis of STRIPS trading activity using ...
Discussion Paper
Treasury Trading at the Close
In past work, we showed that trading in U.S. Treasury securities is becoming increasingly concentrated on the last trading day of each month. In this post, we show that trading is also becoming more concentrated around the designated pricing, or “strike,” times for fixed-income indexes. The concentration is especially pronounced on month-end trading days. We also document a marked shift in trading activity from around 3 p.m. (ET) to around 4 p.m. after a major fixed-income index provider moved its strike time from 3 p.m. to 4 p.m. in January 2021.