Taking Their Time On the Treasury Market

As Mark Calabria made clear earlier this year, reform of the Treasury market has direct, major impact on that for agency debt and MBS.  Indeed, given ongoing Treasury-obligation issuance uncertainties at a time of brute-force fiscal policy along with continuing debt-ceiling drama, the two high-quality liquid assets are tied at the hip even if bank liquidity rules don’t recognize this.  We thus review the new inter-agency Treasury-market report for its agency impact at a time of growing bond-market volatility.  As our in-depth analysis of the new report makes clear, we had to look hard for near-term implications and, after doing our best, came away largely empty-handed.