Fed’s new leverage ratio: the horse that never left the gate
Most of the biggest dealers aren’t leverage constrained now, and experts are sceptical that banks will use the extra capacity for Treasuries
For bank treasurers, it brought back unwelcome memories of the whirlwind selloff in government bonds during the so-called ‘dash for cash’ in Covid’s early weeks.
This time, the scramble to dump US Treasuries following president Donald Trump’s announcement of sweeping tariffs in April left the bond market on the brink of breakdown as dealers struggled to provide trading capacity.
The US Federal Reserve’s response is a set of proposals to cut the leverage ratio for the largest banks, in a bid to
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