-
About the
New York Fed -
Economic
Research -
Financial Institution Supervision
Liberty Street Economics
247 posts on "Financial Markets"May 04, 2020
W(h)ither U.S. Crude Oil Production?
People across the world have cut back sharply on travel due to the Covid-19 pandemic, working from home and cancelling vacations and other nonessential travel. Industrial activity is also off sharply. These forces are translating into an unprecedented collapse in global oil demand. The nature of the decline means that demand is unlikely to respond to the steep drop in oil prices, so supply will have to fall in tandem. The rapid increase in U.S. oil production of recent years was already looking difficult to sustain before the pandemic, as evidenced by the limited profitability of the sector. Now, U.S. producers may have to bear the brunt of the global supply adjustment needed over the near term.
Posted by Blog Author at 7:00 AM in Financial Markets, Macroecon, Pandemic | Permalink | Comments (0)April 17, 2020
Treasury Market Liquidity during the COVID-19 Crisis
A key objective of recent Federal Reserve policy actions is to address the deterioration in financial market functioning. The U.S. Treasury securities market, in particular, has been the subject of Fed and market participants’ concerns, and the venue for some of the Fed’s initiatives. In this post, we evaluate a basic metric of market functioning for Treasury securities— market liquidity—through the first month of the Fed’s extraordinary actions. Our particular focus is on how liquidity in March 2020 compares to that observed over the past fifteen years, a period that includes the 2007-09 financial crisis.
Continue reading "Treasury Market Liquidity during the COVID-19 Crisis" »
Posted by Blog Author at 12:01 PM in Balance of Payments, Banks, Central Bank, Corporate Finance, Financial Markets, Pandemic | Permalink | Comments (1)April 06, 2020
How the Fed Managed the Treasury Yield Curve in the 1940s
The coronavirus pandemic has prompted the Federal Reserve to pledge to purchase Treasury securities and agency mortgage-backed securities in the amount needed to support the smooth market functioning and effective transmission of monetary policy to the economy. But some market participants have questioned whether something more might not be required, including possibly some form of direct yield curve control. In the first half of the 1940s the Federal Open Market Committee (FOMC) sought to manage the level and shape of the Treasury yield curve. In this post, we examine what can be learned from the FOMC’s efforts of seventy-five years ago.
Continue reading "How the Fed Managed the Treasury Yield Curve in the 1940s" »
Posted by Blog Author at 7:00 AM in Economic History, Fed Funds, Federal Reserve, Financial Markets, Fiscal Policy, FOMC, Pandemic, Treasury | Permalink | Comments (0)April 02, 2020
The Value of Opacity in a Banking Crisis
During moments of heightened economic uncertainty, authorities often need to decide on how much information to disclose. For example, during crisis periods, we often observe regulators limiting access to bank‑level information with the goal of restoring the public's confidence in banks. Thus, information management often plays a central role in ending financial crises. Despite the perceived importance of managing information about individual banks during a financial crisis, we are not aware of any empirical work that quantifies the effect of such policies. In this blog post, we highlight results from our recent working paper, demonstrating that in a crisis, a policy of suppressing information about banks' balance sheets has a significant and positive effect on deposits.
Continue reading "The Value of Opacity in a Banking Crisis" »
Posted by Blog Author at 7:00 AM in Economic History, Financial Institutions, Financial Markets, Pandemic | Permalink | Comments (0)February 26, 2020
Did Subprime Borrowers Drive the Housing Boom?
Editor’s note: When this post was first published, the chart labels for “Non-Boom Counties” were incorrect; the labels have been corrected. (February 26, 12:00 pm)
The role of subprime mortgage lending in the U.S. housing boom of the 2000s is hotly debated in academic literature. One prevailing narrative ascribes the unprecedented home price growth during the mid-2000s to an expansion in mortgage lending to subprime borrowers. This post, based on our recent working paper, “Villains or Scapegoats? The Role of Subprime Borrowers in Driving the U.S. Housing Boom,” presents evidence that is inconsistent with conventional wisdom. In particular, we show that the housing boom and the subprime boom occurred in different places.
Continue reading "Did Subprime Borrowers Drive the Housing Boom?" »
Posted by Blog Author at 7:00 AM in Banks, Central Bank, Credit, Crisis, Economic History, Financial Institutions, Financial Markets, Household, Household Finance, Housing, Mortgages, Recession | Permalink | Comments (8)January 15, 2020
How Does Tick Size Affect Treasury Market Quality?
The popularity of U.S. Treasury securities as a means of pricing other securities, managing interest rate risk, and storing value is, in part, due to the efficiency and liquidity of the U.S. Treasury market. Any structural changes that might affect these attributes of the market are therefore of interest to market participants and policymakers alike. In this post, we consider how a 2018 change in the minimum price increment, or tick size, for the 2-year U.S. Treasury note affected market quality, following our recently updated New York Fed staff report.
Continue reading "How Does Tick Size Affect Treasury Market Quality?" »
January 06, 2020
The Evolving Market for U.S. Sovereign Credit Risk
How should we measure market expectations of the U.S. government failing to meet its debt obligations and thereby defaulting? A natural candidate would be to use the spreads on U.S. sovereign single-name credit default swaps (CDS): since a CDS provides insurance to the buyer for the possibility of default, an increase in the CDS spread would indicate an increase in the market-perceived probability of a credit event occurring. In this post, we argue that aggregate measures of activity in U.S. sovereign CDS mask a decrease in risk-forming transactions after 2014. That is, quoted CDS spreads in this market are based on few, if any, market transactions and thus may be a misleading indicator of market expectations.
Continue reading "The Evolving Market for U.S. Sovereign Credit Risk" »
November 08, 2019
At the New York Fed: Fifth Annual Conference on the U.S. Treasury Market
The New York Fed recently hosted the fifth annual Conference on the U.S. Treasury Market. The one-day event was co-sponsored with 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). This year’s agenda featured a series of keynote addresses and expert panels focused on a variety of topics, including issues related to the LIBOR transition, data transparency and reporting requirements, and market structure and risk.
Continue reading "At the New York Fed: Fifth Annual Conference on the U.S. Treasury Market" »
November 04, 2019
Since the Financial Crisis, Aggregate Payments Have Co-moved with Aggregate Reserves. Why?
Fedwire Funds, a key payment system in the United States, is used by banks to wire money to one another throughout the day. Historically, the total value of payments sent over Fedwire has been roughly proportional to economic activity. Since the financial crisis, however, we have instead observed a strong co-movement between total payments and the level of aggregate reserves. This co-movement suggests that a fraction of every dollar of reserves created recirculates on a daily basis. In this post, we investigate why total payments, a flow variable driven by real and financial activity, would co-move with total reserves, a stock variable controlled by the Federal Reserve.
Posted by Blog Author at 7:00 AM in Financial Institutions, Financial Markets | Permalink | Comments (0)October 15, 2019
From the Vault: A Look Back at the October 15, 2014, Flash Rally
Five years ago today, U.S. Treasury yields plunged and then quickly rebounded for no apparent reason amid high volatility, strained liquidity conditions, and record trading volume in the market. Federal Reserve Chair Jerome Powell, then a Board governor, noted that such episodes, “threaten to erode investor confidence” and that investors need “to have full faith in the structure and functioning of Treasury markets themselves.” The October 15, 2014, “flash rally” led to an interagency staff report on the events of that day, an annual series of Treasury market conferences, additional study of clearing and settlement practices, and the introduction of a new transactions reporting scheme. Many of these developments are discussed in posts (see, for example, here and here) in the Liberty Street Economics archive.
Continue reading "From the Vault: A Look Back at the October 15, 2014, Flash Rally" »
About the BlogLiberty Street Economics features insight and analysis from New York Fed economists working at the intersection of research and policy. Launched in 2011, the blog takes its name from the Bank’s headquarters at 33 Liberty Street in Manhattan’s Financial District.
The editors are Michael Fleming, Andrew Haughwout, Thomas Klitgaard, and Asani Sarkar, all economists in the Bank’s Research Group.
Liberty Street Economics does not publish new posts during the blackout periods surrounding Federal Open Market Committee meetings.
The views expressed are those of the authors, and do not necessarily reflect the position of the New York Fed or the Federal Reserve System.
Economic Research Tracker
Liberty Street Economics is now available on the iPhone® and iPad® and can be customized by economic research topic or economist.
View by Topicbank capital balance of payments banks central bank corporate finance credit crisis crisis chronicles cryptocurrencies currency current account dealers demographics dodd-frank dsge economic history education employment euro area exchange rates expectations exports fed funds federal reserve financial institutions financial intermediation financial markets fire sale fiscal policy fomc forecasting foreclosure great recession hey, economist! high frequency trading historical echoes household household finance housing human capital inequality inflation international economics labor economics labor market lender of last resort liquidity macroecon monetary policy mortgages new jersey new york new york city pandemic panic phillips curve puerto rico recession regional analysis regulation repo sandy stocks student loans systemic risk tariffs treasury unemployment wagesMost Viewed1. 2. 3. 4. 5.
Last 12 Months1. 2. 3. 4. 5.Useful LinksComment GuidelinesWe encourage your comments and queries on our posts and will publish them (below the post) subject to the following guidelines:Please be brief: Comments are limited to 1500 characters.Please be quick: Comments submitted after COB on Friday will not be published until Monday morning.Please be aware: Comments submitted shortly before or during the FOMC blackout may not be published until after the blackout.Please be on-topic and patient: Comments are moderated and will not appear until they have been reviewed to ensure that they are substantive and clearly related to the topic of the post. We reserve the right not to post any comment, and will not post comments that are abusive, harassing, obscene, or commercial in nature. No notice will be given regarding whether a submission will or will not be posted.Disclosure PolicyThe LSE editors ask authors submitting a post to the blog to confirm that they have no conflicts of interest as defined by the American Economic Association in its Disclosure Policy. If an author has sources of financial support or other interests that could be perceived as influencing the research presented in the post, we disclose that fact in a statement prepared by the author and appended to the author information at the end of the post. If the author has no such interests to disclose, no statement is provided. Note, however, that we do indicate in all cases if a data vendor or other party has a right to review a post.Archives
RSS Feed