How do Treasury dealers manage their positions?

• 成果类型: Article
• 署名作者: Fleming, Michael; Nguyen, Giang; Rosenberg, Joshua
• 署名单位: Pennsylvania Commonwealth System of Higher Education (PCSHE); Pennsylvania State University; Pennsylvania State University - University Park
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2024.103885
• 发表日期: 2024
• 关键词: Treasury market; Dealers; ISSUANCE; positions; Inventory risk; hedging

摘要

Using 31 years of data (1990-2020) on U.S. Treasury dealer positions, we find that Treasury issuance is the main driver of dealers' weekly inventory changes. Such inventory fluctuations are only partially offset in adjacent weeks and not significantly hedged with futures. Dealers are compensated for inventory risk by means of subsequent price appreciation of their holdings. Amid increased balance sheet costs attributable to post -crisis regulatory changes, dealers significantly reduce their position taking and layoff inventory faster. Moreover, the increased participation of non -dealers (investment funds) in the primary market contributes to diminishing compensation for inventory risk taken on at auctions.