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October 23, 2020

At the New York Fed: Sixth Annual Conference on the U.S. Treasury Market

On September 29, 2020, the New York Fed hosted the sixth annual Conference on the U.S. Treasury Market. The one-day event, held virtually this year, was co-sponsored by the U.S. Department of the Treasury, the Federal Reserve Board, the U.S. Securities and Exchange Commission (SEC), and the U.S. Commodity Futures Trading Commission (CFTC). The agenda featured a number of panels and speeches on the effects of the COVID-19 pandemic on the Treasury market in March 2020, the ensuing policy response, and ways that market resiliency could be improved in light of the vulnerabilities revealed. Two speeches also touched on the ongoing transition from LIBOR to alternative reference rates.

The conference began with a keynote address from New York Fed President John Williams focusing on the events of March 2020. Uncertainty induced by the pandemic led to intense strain and disruption in financial markets and a corresponding rapid and overwhelming response by the Fed, including massive purchases of U.S. Treasury securities and agency mortgage-backed securities. President Williams emphasized the importance of identifying the root causes of the market stress and disruption, and the changes that will help fortify the financial system against future shocks. He also noted that the Federal Reserve System was originally created to ensure financial system stability and this central bank objective remains as critical today as it was a century ago.

Deputy Secretary of the Treasury Justin Muzinich also gave a keynote address centered on the Treasury market effects of the COVID-19 pandemic. He presented evidence of widespread selling of Treasuries by various market participants in response to the uncertainty created by the pandemic. At the same time, increased costs of intermediation, driven by increased volatility, combined with balance sheet constraints, resulted in principal trading firms (PTFs) and dealers being unable to keep up with the demand for intermediation services. In discussing the various emergency lending facilities set up to address market strains, Muzinich emphasized the importance of facility design choices and the strength of the collaboration between the Fed and the Treasury.

There were two panels on the day, both covering aspects of Treasury market disruptions seen in March. The first, hosted by System Open Market Account Manager Lorie Logan, featured panelists from a variety of firms, including representatives from a primary dealer, an asset manager, a hedge fund, and a PTF. The discussion focused on how each firm perceived liquidity conditions from its particular perspective during the extreme illiquidity episode in March. By bringing together a variety of views, the panel shed light on how stress in one market segment could pass through to other segments, thus revealing the interconnected nature of the stress episode.

The second panel was hosted by Fed Vice Chair Richard Clarida and focused on considerations for improving future Treasury market resiliency. Panelists included academics and market participants. Among the topics discussed were broader dissemination of TRACE data to allow for deeper analysis of market dynamics. Panelists also suggested that repo market price transparency improvements and more uniform and transparent margin practices would improve market stability. Finally, the panel recommended further study on whether central clearing for a larger share of Treasury market transactions would make market intermediation more stable under stress.

SEC Commissioner Elad Roisman gave a keynote address in which he reviewed the SEC’s proposal to apply Regulation Alternative Trading System (Reg ATS) and Regulation Systems Compliance and Integrity (Reg SCI) to automated trading systems for government securities. He further discussed possible steps to improve market participant oversight, arguing that similar firms should be regulated in a similar manner, taking differences in markets and oversight regimes into account, as that would promote fair competition and reduce risk. His speech also addressed the benefits of central clearing of Treasury securities, including increased netting and reduced credit risk, both of which would ease dealers’ balance sheet constraints.

There was also a discussion featuring CFTC Chairman Heath Tarbert regarding the adoption of alternatives to LIBOR, given that LIBOR is not guaranteed to be published beyond 2021. To date, the public sector has provided a variety of alternative reference rates, but their usage in contracts and securities is still dwarfed by LIBOR usage. He stated that it is important for market participants to continue to push forward with workable substitutes. President Williams similarly noted the further need for work to move off LIBOR in his remarks.

The conference concluded with comments by Daleep Singh, head of the New York Fed’s Markets Group, who made brief remarks on conference themes. He closed with the observation that the conference brought together a variety of views and an encouragement “to keep promoting opportunity and inclusiveness in the Treasury market community and that includes confronting racial and gender inequities… It’ll make us stronger and more resilient.”

Michael J. Fleming is a vice president in the Federal Reserve Bank of New York’s Research and Statistics Group.

Herman_gabrielGabriel Herman is a policy and market analysis associate in the Federal Reserve Bank of New York’s Markets Group.

Keane_frankFrank Keane is a senior policy advisor and vice president in the Bank’s Markets Group

How to cite this post:

Michael Fleming, Gabriel Herman, and Frank Keane, “At the New York Fed: Sixth Annual Conference on the U.S. Treasury Market,” Federal Reserve Bank of New York Liberty Street Economics, October 23, 2020,


The views expressed in this post are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.

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