CatalystFixed Income

basis trade is a perennial “financial stability risk” at the Fed. yet when you told regulatory hawks (democrats) that allowing banks to hold more UST would help, they panicked that you’d cause the n

What changed

turns out, too much regulation is a negative for financial stability. — via @ericwallerstein

Why it matters

Fed's basis trade risk warning and regulatory panic over UST holdings highlight policy tension.

Sources

basis trade is a perennial “financial stability risk” at the Fed. yet when you told regulatory hawks (democrats) that allowing banks to hold more UST would *help*, they panicked that you’d cause the n