As prepared for delivery.
Good morning, everyone. I would like to begin by thanking the Federal Reserve Bank of New York for hosting this event. I understand that Secretary Bessent addressed this conference last year, and it is my privilege to be here with you today.
In my role as the Deputy Secretary of the Treasury, I am the Chief Operating Officer for the Department, and I have a broad portfolio of policy and operational responsibilities. With this being the Treasury Market Conference, I will focus my remarks today on the Treasury market and the actions that the Trump Administration has taken to facilitate its smooth operation.
I want to emphasize that a well-functioning U.S. Treasury market benefits all Americans, not only financial professionals like yourselves. When the Treasury market works well, our whole economy benefits – from families buying their first homes to entrepreneurs starting new businesses and Main Street workers saving for retirement.
And of course at the Treasury Department, we use Treasury securities for our own financing needs, borrowing the money needed to keep the government running day in, and day out. The objective of Treasury debt management is to finance the government at the least cost over time, and a healthy Treasury market is crucial towards us achieving that goal.
TREASURY MARKET RESILIENCE
As you often hear us say, the Treasury market is the deepest and most liquid market in the world. There is about $32 trillion of marketable Treasury debt outstanding and trading volumes in the secondary market for Treasury securities average approximately $1 trillion per day.
Secretary Bessent and the entire team at Treasury understand the importance of the Treasury market and are working tirelessly to ensure that U.S. Treasuries remain the premier investment product globally. The Treasury market, like any financial market, can experience volatility from time to time, and our focus has been on ensuring that the market remains robust and resilient and can weather inevitable bouts of volatility.
Accordingly, I will describe some of the initiatives we are taking to strengthen the Treasury market.
First, we continue to enhance and expand the buyback program, under which we have now re-purchased nearly $500 billion of Treasury securities over the course of more than 150 operations. The buyback program has two key components: liquidity support and cash management. Liquidity support operations are conducted regularly for nominal coupon securities and Treasury Inflation-Protected Securities (TIPS) across different maturity buckets. These operations support liquidity both directly, by providing market participants opportunities to sell less-liquid securities back to Treasury, and indirectly, by helping intermediaries free up capacity for additional market-making activities, which provide liquidity for their clients. Both the primary dealers and the Treasury Borrowing Advisory Committee tell us that Treasury’s liquidity support buybacks have been an important component in improving liquidity in off-the-run securities in the past two years. Within the liquidity support operations, we have seen the greatest sponsorship from market participants for buybacks of longer maturity bonds, and accordingly we have increased the frequency and sizes of those operations.
On the other end of the maturity spectrum, our cash management buybacks aim to improve Treasury’s capabilities to manage differences in timing of inflows and outflows. Using buybacks to manage those cash flow gaps helps us reduce the volatility of bill auction sizes and large swings in the Treasury General Account (TGA) balance. In cash management buybacks, all of our purchases are of securities with less than two years to maturity. While these purchases seem to get less attention, I want to point out that out of the nearly $500 billion of total buybacks executed in the last two and a half years, approximately $300 billion have been for securities under two years to maturity.
In addition to increasing the size of the buyback program, Treasury has also enhanced its buyback operations in several ways. Mostly notably, at the beginning of this year Treasury began offering the opportunity to directly participate in buybacks to a limited number of additional counterparties (that is, in addition to the primary dealers) based on their participation in Treasury auctions. Broadening direct access to buybacks provides liquidity support directly to more market participants, reduces operational friction, and improves our trade execution through additional competition.
Second, we are supporting the SEC’s effort to expand central clearing in the Treasury market. Additional central clearing can enhance market resilience, improve netting opportunities, and standardize risk management. Expanding central clearing also appears to have promoted some healthy competition, with new clearinghouses launching to contend for the additional clearing activity. As we approach compliance dates at the end of this year and the middle of next year, we are monitoring implementation in the industry, with an eye towards making sure that this transition goes smoothly and achieves the intended benefits. I will be brief about central clearing because I suspect this is a topic that Commissioner Uyeda will cover in greater detail later today.
Third, deregulation has been a key priority of the Trump Administration. In November last year, the federal banking agencies finalized a rule to reform the enhanced supplementary leverage ratio, or eSLR. These changes returned the eSLR to its intended role as a backstop to risk-based capital requirements rather than a distortion of incentives for banks (and in particular bank-owned broker-dealers) to engage in relatively low-risk activities, such as Treasury intermediation. And dealers have put this increased capacity to work, increasing their inventories of Treasury securities to a peak of more than $550 billion in March 2026 and supporting strong and resilient liquidity in the Treasury market this year.
GROWING DEMAND
At Treasury, we keep a close eye on trends in investor demand. We monitor the relevant data of course, but we also engage directly with many of you (and other investors across the globe) to understand important developments in your portfolios, and how Treasury securities fit into your investment plans.
I mentioned bank deregulation a moment ago as a contributor to improved intermediation in the Treasury market. We also see bank investment portfolios as a key source of growing demand for Treasury securities. While each bank’s situation is unique, in total, banks holdings of Treasury securities have grown by more than $300 billion since the end of 2024. Banks tell us that Treasuries are attractive assets for their liquidity, their returns – including when purchased on asset swap – and their benefits in asset liability management.
Another segment of the market where investor demand has grown significantly is the Treasury bill market. Money market mutual funds are some of the largest owners of Treasury bills, and assets under management in the money market mutual fund industry have grown to around $8 trillion. With that growth in assets has come greater demand for Treasury bills as well as financing for other Treasury market segments via repo investments.
Stablecoin providers represent another important source of demand and already own nearly $200 billion of Treasury bills and other close-to-maturity Treasury securities. More important than their current holdings is the significant growth opportunity that they represent in the coming years. As the rules implementing the GENIUS Act are finalized, we may see stablecoin providers continue to grow and add to their holdings of Treasury securities.
Finally, the Federal Reserve has also been a significant buyer of Treasury bills recently. Through both its Reserve Management Purchases and its reinvestment of principal payments from its holdings of agency securities, the Federal Reserve has bought more than $300 billion of Treasury bills this year alone.
The depth of demand for Treasury bills is evident. To manage fiscal outflows during July and August of this year, we increased the net supply of Treasury bills by more than $550 billion, which represents growth of about 8% over a two-month period. It is notable that the money markets absorbed this significant growth in bill issuance remarkably well, with strong auction participation and clear signs of robust end investor demand. Money market mutual funds absorbed approximately 85% of the additional supply, and there was limited pressure on funding markets.
As mentioned in the latest Quarterly Refunding Announcement and as the Secretary emphasized on this stage last year, Treasury continues to monitor all sources of structural demand for Treasury securities, including bank demand, demand from money market mutual funds and stablecoin providers, and developments in the SOMA portfolio. With a focus on these trends, Treasury will seek to optimize the issuance of Treasury securities to finance the government at the least cost over time for the American taxpayer.
NEW AUCTION SYSTEM
Finally, I would like to conclude with some exciting news. As was announced last year, Treasury has been working on upgrading the system we use to auction Treasury securities. Today I am pleased to announce that we plan to transition to the new auction system in the coming months. The new system, which is currently in the final stages of testing, has been designed to be reliable, secure, and flexible, enhancing the tools at our disposal to achieve our debt issuance goals.
That investment reflects a broader commitment: to preserve a Treasury market that is resilient, transparent, and capable of meeting the evolving needs of investors and the nation. We will continue to manage the public debt with discipline, respond thoughtfully to structural changes in demand, and maintain the confidence that has made Treasury securities the world’s benchmark safe and liquid asset.
The depth, breadth, and durability of demand for U.S. Treasury securities remain an extraordinary national strength. And one we are committed to reinforcing for decades to come.
Thank you for your attention today.
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