Assessment of Dealer Capacity to Intermediate in Treasury and Agency MBS Markets

Paul Cochran, Lubomir Petrasek, Zack Saravay, Mary Tian and Edward Wu
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Lubomir Petrasek: https://www.federalreserve.gov/econres/lubomir-petrasek.htm
Mary Tian: https://www.federalreserve.gov/econres/mary-tian.htm

No 2024-10-22, FEDS Notes from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We provide an assessment of broker-dealers’ current and future capacity to support the smooth functioning of the Treasury and agency MBS markets, considering increases in Treasury issuance and continued Federal Reserve balance sheet normalization. Drawing on regulatory data analysis, recent research, and experiences with fixed income market functioning, we focus on two types of constraints that are most relevant for dealers’ intermediation activities: regulatory constraints—specifically the minimum Supplementary Leverage Ratio (SLR) requirement at the Bank Holding Company (BHC) level—and internal risk limits—specifically Value at Risk (VaR) limits at the trading-desk level for each dealer.

Date: 2024-10-22
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfn:2024-10-22

DOI: 10.17016/2380-7172.3610

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