Treasury Market Structure

The U.S. Treasury market is the foundation of the global financial system. With more than $28 trillion in securities outstanding and over $900 billion traded daily, Treasuries serve as a benchmark for interest rates worldwide and a critical source of liquidity, stability, and funding.

Treasury securities – bills, notes, and bonds – are backed by the full faith and credit of the U.S. government and have long been viewed as among the safest and most liquid assets available. Their reliability underpins monetary policy transmission, investor confidence, and global financial stability.

By the Numbers

Federal Reserve

Enhance Market Resilience by Exempting Treasuries from Leverage Ratios

Starting in January 2018, large U.S. banks have been required to comply with two leverage ratios: the Supplementary Leverage Ratio (“SLR”) and the U.S. Tier 1 Leverage Ratio (“Tier 1 LR”). The most restrictive leverage ratio becomes the binding capital requirement. Unlike risk-based capital, leverage capital is designed to be non-risk-sensitive, meaning U.S. Treasury securities and high-yield corporate bonds are treated similarly. During severe market downturns and “dash for cash” scenarios, the expansion of large banks’ balance sheets increases the likelihood of leverage ratios becoming binding capital constraints. This leads bank-affiliated brokers/dealers to reduce market intermediation, including in the U.S. Treasury market.

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