US Treasury asks major banks if it should buy back bonds

WASHINGTON, Oct 15 (Reuters): The US Treasury Department is asking primary dealers of US Treasuries whether the government should buy back some of its bonds to improve liquidity in the $24 trillion market.
Liquidity in the world's largest bond market has deteriorated this year partly because of rising volatility as the Federal Reserve rapidly raises interest rates to bring down inflation.
The central bank, which had bought government bonds during the COVID-19 pandemic to stimulate the economy, is now also reducing the size of its balance sheet by letting its bonds reach maturity without buying more, a move which investors fear could exacerbate price swings.
The Treasuries market has swelled from $5 trillion in 2007 and $17 trillion in early 2020, while banks are facing more regulatory constraints that they say make it more difficult to intermediate trades.