2. Treasurys Role

2. Treasurys Role - Treasurys Trading Is A Brand New World...

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Treasurys Trading Is A Brand New World WSJ, September 18, 2003 NEW YORK -- Being nailed to a seat for a solid nine hours every day is one of the few things that hasn't changed for traders of Treasurys over the past few years. But many other aspects of trading U.S. government bonds have fundamentally altered at a time when fixed-income returns at big banks have never been so profitable. These range from the drastically larger average size of trades to the prevalence of electronic trading. Chief among the changes has been the startling growth of the nearly $5 trillion mortgage- backed securities market, which frequently uses the $3.3 trillion pool of outstanding Treasurys to manage interest-rate risk. "The heightened awareness among Treasury traders of what drives the mortgage market is the biggest change we have seen in the marketplace for a long time," said Brian Edmonds, global head of U.S. Treasury Trading at Banc of America Securities in New York. "It wasn't on my radar screen a few years ago when the mortgage market was smaller than the Treasury market." While the mortgage market and, indeed, the $4.1 trillion corporate-bond market, the $34.4 trillion U.S. interest-rate swap market and the $2.4 trillion agency-debt market are sizable entities themselves, they are built on the foundation provided by the status of Treasurys as the ultimate safe-haven asset. "Treasurys are ultimately the clearinghouse for interest-rate risk," said Robert Lunder, head
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This note was uploaded on 09/27/2009 for the course UGBA 133 taught by Professor Distad during the Summer '08 term at Berkeley.

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2. Treasurys Role - Treasurys Trading Is A Brand New World...

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