Safeguarding the Treasury Market

2026, Paper: "For decades, the US Treasury market has been the most liquid and resilient financial market in the world. Even in times of stress, Treasury securities were assumed to be tradable in large quantities, rapidly, and with little friction—a reliable anchor for the broader financial system. In recent years, however, this assumption has come under question. Severe market dysfunction, most notably in March 2020 but also in April 2025, shows that even the world’s safest securities market can seize up abruptly, with consequences far beyond government bond trading. These concerns arise in the context of a Treasury market that has grown dramatically. The ratio of publicly held federal debt to GDP is now about 100 percent, and given the current US fiscal stance, this ratio will keep rising (see Chart 1). With expanded issuance, the private financial system’s ability to...."