Primary Dealers’ Bond Cuts Drain Liquidity: Chart
This article is for subscribers only.
Wall Street’s biggest bond dealers are paring inventories of Treasuries to an almost three-year low, adding to concern diminishing liquidity will amplify yield swings when the Federal Reserve begins raising interest rates.
The CHART OF THE DAY shows the Fed’s 22 primary dealers cut positions in Treasuries in July to the lowest level since 2011 as they reduced holdings in every maturity sector less than 11 years, according to New York Fed data. Primary dealers, which are obligated to trade with the central bank at auctions, trimmed their holdings to $18.3 billion in the week ending July 16, down from $27.7 billion the previous week and a record $146 billion in October.