Barclays Predicts Growing Treasury Market Will Need Bailouts

Barclays strategists warn the US Treasury market is now structurally unstable after explosive issuance growth and will likely require occasional "official interventions" to maintain functioning. The diagnosis implies elevated liquidity stress and potential for higher volatility in yields and Treasury repo markets, increasing the probability of episodic central-bank or government backstops. Portfolio managers should expect bouts of dislocation in core fixed income and factor this into duration, liquidity buffers, and counterparty risk plans.

Analysis

Barclays strategists warn the US Treasury market is now structurally unstable after explosive issuance growth and will likely require occasional "official interventions" to maintain functioning. The diagnosis implies elevated liquidity stress and potential for higher volatility in yields and Treasury repo markets, increasing the probability of episodic central-bank or government backstops. Portfolio managers should expect bouts of dislocation in core fixed income and factor this into duration, liquidity buffers, and counterparty risk plans.