Treasury dealers’ financing burden can outlast their bond holdings, Fed study finds
A Federal Reserve study finds Treasury dealers’ financing to clients can persist after their own bond inventories decline. Each dollar of coupon issuance expanded dealer balance sheets by about 21 cents, mostly through client financing; the effect on dealer holdings faded within three days, while client financing remained elevated for about a week. Issuance also used internal risk-limit capacity, though the study’s estimated effects were below aggregate regulatory headroom. Recent SOFR readings were 3.92%–3.95%, while a New York Fed bank described funding conditions as tranquil. The possibility that constrained intermediaries could reduce financing for Bitcoin traders is speculative: the study does not document such a spillover. Evidence of persistent repo pressure alongside worsening crypto borrowing terms would strengthen that case.
