Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/284030 
Year of Publication: 
2023
Series/Report no.: 
Staff Report No. 1070
Publisher: 
Federal Reserve Bank of New York, New York, NY
Abstract: 
We show a significant loss in U.S. Treasury market functionality when intensive use of dealer balance sheets is needed to intermediate bond markets, as in March 2020. Although yield volatility explains most of the variation in Treasury market liquidity over time, when dealer balance sheet utilization reaches sufficiently high levels, liquidity is much worse than predicted by yield volatility alone. This is consistent with the existence of occasionally binding constraints on the intermediation capacity of bond markets.
Subjects: 
Treasury market
liquidity
volatility
dealer intermediation
value-at-risk
JEL: 
G01
G1
G12
G18
E58
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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