As regulators push to transition away from Libor, sales of Treasuries linked to the successor rate could boost the new benchmark’s credibility and expand nascent markets for related debt and derivatives.
The expiration of the temporary SLR changes should enhance the soundness of the banking system, but likely at the cost of Treasury market liquidity.
The Fed announced two actions Thursday in response to stress in the market for U.S. Treasuries.
Uncertainty about the unwinding of Libor could increase spread volatility and create opportunities in products indexed to short-term rates as the market evolves.
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