Search Results
Working Paper
The Federal Reserve's Portfolio and its Effect on Interest Rates
We explore the historical composition of the Federal Reserve's Treasury portfolio and its effect on Treasury yields. Using data from 1985 to 2016, we show that the divergence of the composition of the Federal Reserve's portfolio from overall Treasury securities outstanding is associated with a statistically significant effect on interest rates. In aggregate, when the Federal Reserve's portfolio has shorter maturity than overall Treasury debt outstanding, measures of the term premium are higher at all horizons; likewise, when the Federal Reserve's portfolio has longer maturity, term premiums ...
Discussion Paper
Primary Dealers’ Waning Role in Treasury Auctions
In this post, we quantify the macroeconomic effects of central bank announcements about future federal funds rates, or forward guidance. We estimate that a commitment to lowering future rates below market expectations can have fairly strong effects on real economic activity with only small effects on inflation.
Speech
Comments on “A Skeptical View of the Impact of the Fed’s Balance Sheet”: remarks at the 2018 U.S. Monetary Policy Forum, New York City
Remarks at the 2018 U.S. Monetary Policy Forum, New York City.
Working Paper
Unconventional monetary policy and the behavior of shorts
In November 2008, the Federal Reserve announced the first of a series of unconventional monetary policies, which would include asset purchases and forward guidance, to reduce long-term interest rates. We investigate the behavior of shorts, considered sophisticated investors, before and after a set of these unconventional monetary policy announcements that spot bond markets did not fully anticipate. Short interest in agency securities systematically predicts bond price changes and other asset returns on the days of monetary announcements, particularly when growth or monetary news is released, ...
Report
The Netting Efficiencies of Marketwide Central Clearing
Market disruptions in response to the COVID pandemic spurred calls for the consideration of marketwide central clearing of Treasury securities, which might better enable dealers to intermediate large customer trading flows. We assess the netting efficiencies of increased central clearing using nonpublic Treasury TRACE transactions data. We find that central clearing of all outright trades would have lowered dealers’ daily gross settlement obligations by roughly $330 billion (60 percent) in the weeks preceding and following the market disruptions of March 2020, but nearly $800 billion (70 ...
Speech
The Federal Reserve’s Recent Actions to Support the Flow of Credit to Households and Businesses
Remarks before the Foreign Exchange Committee, Federal Reserve Bank of New York, New York City.
Speech
Disentangling Messages from the Treasury Market
Remarks at 2023 U.S. Treasury Market Conference, Federal Reserve Bank of New York, New York City.
Journal Article
Current Recession Risk According to the Yield Curve
The slope of the Treasury yield curve is a popular recession predictor with an excellent track record. The two most common alternative measures of the slope typically move together but have diverged recently, making the resulting recession signals unclear. Economic arguments and empirical evidence, including its more accurate predictions, favor the difference between 10-year and 3-month Treasury securities. Recession probabilities for the next year derived from this spread so far remain modest.
Speech
Balance Sheet Reduction: Progress to Date and a Look Ahead
Remarks at 2024 Annual Primary Dealer Meeting, Federal Reserve Bank of New York, New York City.
Working Paper
Balance-Sheet Netting in U.S. Treasury Markets and Central Clearing
In this paper, we provide a comprehensive investigation of the potential for expanded central clearing to reduce the costs of the supplementary leverage ratio (SLR) on Treasury market intermediation in both cash and repo markets. Combining a detailed analysis of the rules involved in calculating the SLR with a unique set of regulatory data, we conclude that expanding central clearing would have relatively limited effects on the level of SLRs. We do find intermediaries’ increase their balance sheet netting when their regulatory balance sheet costs are higher. Our data permits us to ...