Update
Fed Study: Treasury Dealers Can Persist in Financing Clients After Inventory
A Federal Reserve study found that Treasury dealers can continue to finance clients' bond purchases even after their own inventory of bonds has largely cleared. The study, covering eight large dealers from January 2016 to June 2025, estimates that each dollar of Treasury coupon issuance expanded dealer balance sheets by about 21 cents, with two-thirds of this attributed to client financing. The effect of issuance on dealers' long positions dissipates within about three days, while the increase in reverse repo (financing provided to clients) remains measurable for a week.