Jul 31, 2022
In Authors Forum
AllianceBernstein affirmed the statement of the U.S. competent authority that it would strengthen supervision of the Treasury bill market a few days ago. Regrettably, just assuring investors of greater price transparency in trades may not stop the market turmoil that would require action by the authorities. The U.S. Treasury Department and the Securities and Exchange Commission also joined the effort to ask the Financial Industry Regulatory Authority (FINRA) to collect data on transactions in the cash market for Treasury bills. This is the same as tracking the corporate and municipal bond markets, with the goal of sharing information with investors. It is good news that U.S. authorities recognize the need for greater transparency in transactions. This will help investors make better investment decisions. It's just that the solution to market volatility in Treasury bills may not be that simple. the heart of the problem That's because the real core issue of market volatility is liquidity, not transparency. The fact is that market trading has failed to keep up with the market's growth, leading to greater volatility in the Treasury bills, the world's considered "risk-free" market. The size of the U.S. Treasury market has expanded dramatically number list from $ 4.2 trillion in 2007 to $ 12.5 trillion in 2015 . But during the same period, the average daily volume fell from $ 570 billion to $ 515 billion. As a result, the number of days it takes for a single security to turn around has also increased from 8 to 24 days. Under such circumstances, the liquidity of the market cannot be called good. Therefore, it also makes it easier to understand why a market that is considered by investors to be " liquid " occasionally freezes . is an obvious example. ecentralized configuration reduces volatility AllianceBernstein believes that investors should take steps to prevent such market volatility. A better solution is a global fixed income portfolio. A global portfolio can diversify across yield curves, economic cycles, currency cycles and business cycles, helping to reduce volatility in a volatile environment. In addition, when U.S. Treasuries fluctuate, global government bonds can provide liquidity from other regions. Investors seeking to maintain the character of core bonds should hedge their currency exposures. Over the past 20 years, there have been currency safe-haven global bonds that have been less volatile than U.S. bonds, thanks to the benefits of diversifying into economic trends. During the same period, it also slightly outperformed U.S. bonds. Therefore, although AllianceBernstein affirms the authorities' efforts to improve the transparency of transaction information, it seems that they are not doing enough. The U.S.