Breaking Down TRACE Volumes Further

Doug Brain, Michiel De Pooter, Dobrislav Dobrev, Michael Fleming, Peter Johansson, Frank Keane, Michael Puglia, Tony Rodrigues, and Or Shachar

Editor’s note: A previous version of this post contained a table that incorrectly reported second off-the-run trading volumes of 0.0 for TIPS and FRNs. The table has been corrected to show that these figures are not separately calculated but are instead included in deep off-the-run volumes. (January 8, 2019, 3:00 p.m.)




Following an earlier joint FEDS Note and Liberty Street Economics blog post that examined aggregate trading volume in the Treasury cash market across venues, this post looks at volume across security type, seasoned-ness (time since issuance), and maturity. The analysis, which again relies on transactions recorded in the Financial Industry Regulatory Authority’s (FINRA) Trade Reporting and Compliance Engine (TRACE), sheds light on perceptions that some Treasury securities—in particular those that are off-the-run—may not trade very actively. We confirm that most trading volume is made up of on-the-run securities, especially in venues where the market has become more automated. However, we also find that daily average volume in off-the-run securities is still a meaningful $157 billion (27 percent of overall volume), and accounts for a large share (41 percent) of trading in the dealer-to-client venue of the market.

Is the United States Relying on Foreign Investors to Fund Its Larger Budget Deficit?

Thomas Klitgaard and Linda Wang



The federal tax cut and the increase in federal spending at the beginning of 2018 substantially increased the government deficit, requiring a jump in the amount of Treasury securities needed to fund the gap. One question is whether the government will have to rely on foreign investors to buy these securities. Data for the first half of 2018 are available and, so far, the country has not had to increase the pace of borrowing from abroad. The current account balance, which measures how much the United States borrows from the rest of the world, has been essentially unchanged. Instead, the tax cut has boosted private saving, allowing the United States to finance the higher federal government deficit without increasing the amount borrowed from foreign investors.

The Pre-FOMC Announcement Drift: More Recent Evidence

David Lucca and Emanuel Moench

Editor’s note: When this post was first published, the placement of the shaded confidence intervals in the charts was incorrect; the charts have been corrected. (December 3, 2018, 3:20 p.m.)



We had previously documented large excess returns on equities ahead of scheduled announcements of the Federal Open Market Committee (FOMC)—the Federal Reserve’s monetary policy-making body—between 1994 and 2011. This post updates our original analysis with more recent data. We find evidence of continued large excess returns during FOMC meetings, but only for those featuring a press conference by the Chair of the FOMC.

"Skin in the Game," Depositor Discipline, and Bank Risk Taking

Haelim Anderson, Daniel Barth, and Dong Beom Choi




In a previous post, we argued that double liability for bank owners might not limit their risk taking, despite the extra “skin in the game,” if it also weakens depositor discipline of banks. This post, drawing on our recent working paper, looks at the interplay of those opposing forces in the late 1920s when bank liability differed across states. We find that double liability may have reduced the outflow of deposits during the crisis, but wasn’t successful in mitigating bank risk during the boom.

Just Released: A Look at Borrowing, Repayment, and Bankruptcy Rates by Age

Andrew Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klaauw



Household debt balances increased in the third quarter of 2018, a seventeenth consecutive increase. Total debt balances reached $13.51 trillion, a level more than 20 percent above the trough reached in 2013, according to the latest Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data. With today’s report we begin publishing a new set of charts that depict debt and repayment outcomes by the age of the borrower. The report and this analysis are based on the New York Fed Consumer Credit Panel (CCP), a 5 percent sample of anonymized Equifax credit reports. Here we’ll highlight three of the new charts.

Just Released: New York State’s Community Colleges are Successfully Partnering with Employers

Jaison R. Abel, Tony Davis, Richard Deitz, and Edison Reyes



Community colleges frequently work with local employers to help shape the training of students and incumbent workers. This type of engagement has become an increasingly important strategy for community colleges to help students acquire the right skills for available jobs, and also helps local employers find and retain workers with the training they need. The Federal Reserve Bank of New York conducted a survey of community colleges in New York State with the goal of documenting the amount and types of these kinds of activities taking place. Our report, Employer Engagement by Community Colleges in New York State, summarizes the findings of our survey.

Ten Years after the Crisis, Is the Banking System Safer?

Dong Beom Choi, Fernando Duarte, Thomas M. Eisenbach, and James Vickery




In the wake of the 2007-09 financial crisis, a wide range of new regulations have been introduced to improve the stability of the banking system. But has the banking system become safer since the crisis? In this post, we provide a new perspective on this question by employing four analytical models, each measuring a different aspect of banking system vulnerability, to evaluate how system stability has evolved over the past decade.