Group Proposes Undertaking for Resilience of U.S. Treasury Markets

A report from the Group of 30, made up of central bankers, regulators, academics, and officials including Treasury Secretary (and ex-Fed Chair) Janet Yellen, recommends an overhaul of the U.S. Treasury Market. The report analyzes the current state of the U.S. Treasury Market following a series of economic shocks that reduced its ability to efficiently function. “The COVID-19 pandemic cast further doubts over the system's ability to absorb financial trauma and recover. The authors warn that if intermediation is not taken immediately, it could result in permanent damage to the Treasury, impact U.S. fiscal policy for decades, and burden tax-payers.” The report proposes ten recommendations for increasing the liquidity of the Treasury market during times of stress by expanding the capacity of firms and asserting greater monetary confidence and indicates that the objective of these recommendations is to improve the functioning capacity of the Treasury market in both normal times and in periods of extreme financial distress. The Wall Street Journal interviewed former Treasury Secretary Timothy Geithner,  who chaired the report. Geithner told the WSJ that making the Treasury market more resilient would reduce the damage to the financial system caused by future shocks, whatever the source, and reduce the need for exceptional action by the Fed in crisis.  Geithner also led a webinar on the Group of 30 proposals, which can be viewed here.