Will developments in technology, geopolitics, and the financial market reduce the dollar’s important roles in the global economy? This post updates prior commentary [here, here, and here], with insights about whether recent developments, such as the pandemic and the sanctions on Russia, might change the roles of the dollar. Our view is that the evidence so far points to the U.S. dollar maintaining its importance internationally. A companion post reports on the Inaugural Conference on the International Roles of the U.S. Dollar jointly organized by the Federal Reserve Board and Federal Reserve Bank of New York and held on June 16-17.
The Treasury Market Practices Group (TMPG) recently released a consultative white paper on clearing and settlement processes for secondary market trades of U.S. Treasury securities. The paper describes in detail the many ways Treasury trades are cleared and settledinformation that may not be readily available to all market participantsand identifies potential risk and resiliency issues. The work is designed to facilitate discussion as to whether current practices have room for improvement. In this post, we summarize the current state of clearing and settlement for secondary market Treasury trades and highlight some of the risks described in the white paper.
In the spirit of this season of year-end lists of accomplishments, Liberty Street Economics offers a roundup of our most viewed posts. Our readers continued to gravitate toward timely, topical posts; our most popular explained how the Fed manages its enlarged balance sheet—a major focus of the FOMC, Congress, markets, and economists. Prompted by reader questions in response to their first post, the authors also penned a follow-up post. Another hit this year described an innovative indicator of economic growth—night light intensity measured via satellite—and used it to fact-check official Chinese growth estimates.
Over the last decade, the concept of “safe assets” has received increasing attention, from regulators and private market participants, as well as researchers. This attention has led to the uncovering of some important details and nuances of what makes an asset “safe” and why it matters. In this blog post, we provide a review of the different aspects of safe assets, discuss possible reasons why they may be beneficial for investors, and give concrete examples of what these assets are in practice.
Dobrislav Dobrev and Ernst Schaumburg Third in a five-part series The U.S. Treasury market is one of the deepest and most liquid markets in the world, with significant trading in both Treasury futures and benchmark securities. In this post, we examine the pattern of trading activity in these instruments and document the substantial increase in […]