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Treasuries May Be Regulated More Like Corporate Bonds

U.S. Treasury Department is working on a plan to gather, and potentially disseminate, information on government bonds.

By Alexandra Scaggs and Liz Capo McCormick, Bloomberg | Updated on April 15, 2016

The U.S. government expects to come up with a plan by year-end to gather more complete data on trading in the Treasuries market. It may also decide how much of the information—if any—it will release to taxpayers.

"For us to do our jobs and provide the kind of oversight we need to provide for these markets to assure the public they're safe and sounce, we do need to have better information." --Jerome Powell, Federal Reserve GovernorThe Treasury Department is developing a plan for regulators to access “all cash Treasuries data,” U.S. Treasury Counselor Antonio Weiss told subcommittees of the Senate Banking Committee Thursday. By year-end, the Treasury also “will have articulated a point of view about post-trade reporting” of data, he said.

The question of how widely trading data should be disseminated is a “controversial” one, Weiss said. It’s the opening debate in the government’s first review since 1998 of the structure of the $13.4 trillion market. The workings of the benchmark market for global borrowing—among the world’s deepest and most liquid—had largely gone without scrutiny until a 12-minute crash and rebound in yields on Oct. 15, 2014.

A move to introduce post-trade reporting in Treasuries would shift the market for U.S. government debt closer to the approach in corporate and municipal bonds, where self-regulatory industry organizations have already introduced the practice for prices and trade volumes.

 

The Cost of Transparency in Treasuries

Public reporting of trading data may raise the cost of Treasuries transactions and benefit automated traders at the expense of bond dealers that hold clients’ securities on their balance sheets, interest-rate strategist Michael Cloherty from RBC Capital Markets wrote in an April 12 note. Other researchers have found benefits. The added transparency reduced trade execution costs in corporate debt, according to a 2007 Journal of Finance paper co-authored by Securities and Exchange Commissioner Michael Piwowar.

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