Hedge funds, Monday’s report noted, were among the largest sellers of Treasuries amid the March 2020 havoc. The Financial Stability Oversight Council, or FSOC—a separate panel of regulators charged with monitoring threats to overall stability—has established two other inter-agency working groups to study the role of open-ended mutual funds and hedge funds in the episode.
In studying the 2020 episode and other more minor Treasury-market disruptions, the report called it a “recurring theme” that during times of stress intermediary institutions have only a limited capacity and willingness to provide the liquidity needed for normal market operations. It’s also happened against a backdrop of surging supply of government debt.
One potential change coming is more detailed reporting on trading volumes between dealers and dealers and customers of Treasuries, detailed by category including maturity. The introduction of aggregated weekly reporting has proceeded well, Monday’s report suggested. Given “the lack of negative market feedback, it is consistent with prior principles to explore increasing transparency further,” it said.
In addition to the Treasury Department, other members of the IAWG are the Fed’s Board of Governors, the New York Fed, the Securities and Exchange Commission and the Commodity Futures Trading Commission.
This article was provided by Bloomberg News.