If there is one financial market that could put in doubt the stability of the entire global financial system it is the $23 trillion US Treasury market.
Adam, great post. Would have to comment that Yesha's point about treasury markets have fragmented regulation is not unique. I work in the corporate bond space and the SEC does not oversee all of it. Dealers largely write the rules and run the "auctions" (new issue). The SEC supervises firms that trade corporate bonds. The Fed monitors the major broker-dealers. CFTC oversees derivatives on bonds, same goes for equities.
TL;DR - Treasury markets are no more or less fragmented than other security markets when it comes to regulation
'But if this is the future, it raises the question: are we on a ratchet in which macroeconomic shocks and weak market structure force central banks repeatedly to intervene?'
Stuck In Hell: Fed Creating A Cycle Of Crises It Then ‘Rescues’ Us From | Nomi Prins
"The risk is not that Treasuries suddenly become worthless, as a result of US government default or hyperinflation." and "There were too many sellers and not enough buyers, so the price of highly rated entirely safe securities suddenly plunged and yields surged."
If there is no risk of default/hyperinflation, I don't understand why the assumption is that prices should not decline and yields increase to a level where there are 'enough buyers'? The system is not breaking, it is just not allowing prices to actually clear.
Prof. Tooze,
The Republicans say that they plan to hold the world’s financial system hostage next year.
Do the markets consider the possibility that the US will purposely default on its bonds?
Bernard Leikind
Tampa FL
Adam, great post. Would have to comment that Yesha's point about treasury markets have fragmented regulation is not unique. I work in the corporate bond space and the SEC does not oversee all of it. Dealers largely write the rules and run the "auctions" (new issue). The SEC supervises firms that trade corporate bonds. The Fed monitors the major broker-dealers. CFTC oversees derivatives on bonds, same goes for equities.
TL;DR - Treasury markets are no more or less fragmented than other security markets when it comes to regulation
'But if this is the future, it raises the question: are we on a ratchet in which macroeconomic shocks and weak market structure force central banks repeatedly to intervene?'
Stuck In Hell: Fed Creating A Cycle Of Crises It Then ‘Rescues’ Us From | Nomi Prins
https://www.youtube.com/watch?v=TNvzQa7b-KU&t=3230s
"The risk is not that Treasuries suddenly become worthless, as a result of US government default or hyperinflation." and "There were too many sellers and not enough buyers, so the price of highly rated entirely safe securities suddenly plunged and yields surged."
If there is no risk of default/hyperinflation, I don't understand why the assumption is that prices should not decline and yields increase to a level where there are 'enough buyers'? The system is not breaking, it is just not allowing prices to actually clear.