On Thursday, September 26, New York Fed President John Williams spoke at the 10th U.S. Treasury Market Conference about how the annual interagency collaboration has strengthened the understanding of Treasury market resiliency and that of adjacent markets. He also shared news about the New York Fed’s ongoing commitment to ensuring that the financial system continues to stand on a strong foundation of reference rates.
He said:
“What drives all of our efforts—from staff reports, to conferences, to actions, and all the communication in between—is that liquid, well-functioning markets for Treasury and related securities are absolutely essential for credit to flow and the economy to prosper. It’s not an overstatement that a well-functioning U.S. Treasury market is critical to our economy, and, in fact, to the entire world.”
“The [Reference Rate Use Committee] will serve as an essential partnership that builds upon the work and accomplishments of the [Alternative Reference Rates Committee], by helping to preserve a robust system of reference rates.”
“Although there has been significant progress, the growth and evolution of this market remind us of the importance of staying focused on this work and continuing to make progress in the years ahead.”
President Williams explained that following the “flash rally” in the U.S. Treasury market in October 2014, the Joint Member Agencies came together for a conference in 2015 to discuss potential operational risks, regulatory requirements, and repo market considerations. He added that, “the organizers recognized that it would be important to have a regular forum to address developments in the Treasury market and adjacent markets, in order to continue to study structural issues and explore ongoing developments as a way to prevent disruptions to the system.”
Looking back some of the issues raised in the first Joint Staff Report, he noted that “those themes are still at the forefront of our conversations.” He pointed to the role of principal trading firms, the need for improved transparency and increased availability of Treasury market data, and expanded central clearing as important, recurring topics discussed in this forum over the years.
President Williams then turned to something that is at the core of the financial system and closely connected to the Treasury market: reference rates. “Thankfully, we have said good riddance to LIBOR, and our financial system is now resting on a safe and solid foundation,” he said. He announced that the New York Fed is launching the Reference Rate Use Committee (RRUC), which will “convene private market participants to support integrity, efficiency, and resiliency in the use of interest rate benchmarks—or reference rates—across financial markets, including the rates published by the New York Fed.”
President Williams closed by emphasizing the importance of continuing this work together. “In an era of heightened uncertainty and volatility, it is essential that the U.S. Treasury market remain liquid and resilient, so that all financial markets can operate effectively,” he said. “If you were ever in doubt of how important this is, the experience of the past several years should convince you otherwise.”
Julie Lasson is an executive communications specialist at the New York Fed.
The views expressed in this article are those of the contributing authors and do not necessarily reflect the position of the New York Fed or the Federal Reserve System.
