The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Banking

US treasury market and fails to deliver – The history: dealers have resisted improvements in their greed for profits

For years, efforts by the US Treasury itself to formally resolve the growing fails issue have been brushed aside by market participants as unnecessary.

Jeff Huther, the former director of the Office of Debt Management at the Treasury had battled for several years for a solution, getting as far as a White Paper produced in April 2006 suggesting stricter enforcement of delivery and penalties.


No need, responded the Bond Market Association. “The Association has worked with its members [bond traders and dealers] to address chronic fail issues with respect to risk, pricing and liquidity,” it asserted. “Indeed, the Association has focused its efforts on developing pre-emptive practices that would make it unlikely that a significant fails event would occur.”


That was in spite of warnings by Treasury Committee members themselves at the end of 2005 that the chronic fails had begun to affect the mortgage-backed and corporate bond markets. Trimbath believes that given that a blind eye was turned to fails in the treasuries markets, that in turn encouraged fails to deliver in the mortgage bond markets and to a lesser extent the corporate bond market. “In 2004 the failure to deliver rate for government agency MBS was 40%,” she says.


Significant fails in 2003 caused chaos for treasury market participants, but still no penalty was introduced.




You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree