Fewest U.S Treasury Traders Since 1960

August 3, 2008 by · Leave a Comment
Filed under: Industry News 

Bloomberg reported that we have the fewest primary government securities dealers since 1960. I wonder what kind of added volatility this will bring as we do our open market operations of selling U.S. government securities?

This also could just be because of consolidation of the years, maybe once the investment banks gets more concentrated we will see a time when different acquisitions will be spun off and we will see more primary dealers? Time will tell what this is an indication of. Here is some of the article.

Article:

For the first time since 1960, when it created the network of securities firms obligated to buy and sell Treasury bonds, the U.S. government has the fewest bond traders making markets in its debt and a bigger burden for American taxpayers financing record federal deficits.

The number of so-called primary government securities dealers declined to 19 last month when Bank of America Corp., based in Charlotte, North Carolina, acquired the troubled Countrywide Financial Corp. The sale was the climax of dozens of bank failures, triggered by the biggest decline in residential real estate since the Great Depression and the seizing up of credit markets from New York to London. The Federal Reserve Bank of New York, the agent of the U.S. Treasury, plans to shrink the dealers again when JPMorgan Chase & Co. completes its takeover of Bear Stearns Cos.

Fewer firms bidding for U.S. bonds means “you’re going to have sloppier auctions,” said Mark MacQueen, a money manager in Austin, Texas, at Sage Advisory Services, who traded Treasuries at dealer Merrill Lynch & Co. in the 1980s. “The taxpayer and the government are paying more no matter what happens.”

The paucity of primary dealers coincides with the largest borrowing requirement in American history and the acknowledgment by the administration of President George W. Bush that the U.S. will finance a budget deficit totaling a record $482 billion next year. When the dealer system began 48 years ago with 18 firms, the U.S. had a $300 million surplus. The group has shrunk from a peak of 46 in 1988.

Click Here to Continue Reading

Speak Your Mind

Tell us what you're thinking...
and oh, if you want a pic to show with your comment, go get a gravatar!