US Treasuries
BofA cut $89 billion of AFS securities in H1
Pivot away from fair-value bond investments most sweeping among large US banks
Sovereign bonds top choice for IM collateral
Drive towards higher interest-earning assets strongest at CME and LCH among top CCPs
CCPs shun central banks in liquidity buffers rejig
LCH, Ice US and CME lead the way towards commercial banks
Peak IM call hits record $4.8bn at FICC’s GSD
Required IM also rose to all-time high during volatile Q1
One strike and they’re out: traders threaten liquidity stoppage
PTFs vow to withdraw from Treasuries market in protest at SEC registration plans
Eurex scrambles to avert Treasury collateral ban on US default
Current policy prevents CCP from selectively excluding eligible collateral
First Republic taps Fed facilities in effort to plug funding hole
Discount window and BTFP provide temporary relief as deposits slump $72bn in Q1
BofA slashed AFS Treasuries holdings by 36% in Q1
Partial sale of securities portfolio crystallises $200 million of paper losses
Lending via Fed’s BTFP overtakes discount window
Emergency facility extended $79bn last week, $10bn more than central bank’s traditional credit lending tool
The Catch-22 of US banks’ liquidity buffers
US banks are using held-to-maturity bonds to underpin liquidity adequacy, grating against accounting guidance. What happens if they’re forced to sell?
At regional US banks, BTFP-eligible securities top $300bn
Assets classified as held-to-maturity made up less than 19% of aggregate securities portfolios in 2022
First Republic had just $11bn eligible for Fed’s new facility
The bank held nearly $20bn of municipal bonds, representing over 60% of its securities portfolio
US regional banks hold smaller proportion of high quality assets
Share of Level 1 assets at Capital One, Truist, US Bancorp lowest across US banks subject to LCR
Missing Basel metric could have revealed SVB risks
US regulators did not implement economic value of equity test that SVB failed badly in 2021
At US banks, less than 50% of liquid assets classified as AFS
Goldman Sachs reported smallest proportion relative to HQLAs across US banks subject to LCR
Contrarian Goldman grew fair-value bond book in 2022
Held-to-maturity securities balloon, but bank also adds mark-to-market Treasuries as others curtail them
Commercial bank cash grows more popular for initial margin
Shift driven by Ice Europe as CCPs diverge on preferred type of collateral
Risk.net’s top 10 investment risks for 2023
Geopolitical frictions, sticky inflation and a hard landing are among the hazards cited by investors
Lawmakers join pushback over SEC dealer rule
Bipartisan letter to Treasury says proposal would damage market liquidity
MMFs’ reverse repos with Fed surged 35% last year
Fidelity-run funds drove 29% of the $601 billion in new trades
Treasury traders remain wary about adopting algos
Yet proponents insist US government bond market is ‘ready for disruption’
Finra head recognises ‘challenges’ for bond transparency drive
Cook says regulators thinking about industry’s operational and liquidity concerns
PTFs call for reform before Treasuries clearing mandate
Non-banks warn all-to-all trading relies on requiring dealers to accept ‘done away’ trades
SEC, Treasury warn against zero haircuts for Treasury repos
Gensler and Liang say more conservative treatment of hedge fund trades is desirable