One Trader Calls All the Shots in the Treasury Bond Market
The Fed is so dominant that “vigilantes” have lost their power as a check on government excess.
Illustration: Elise van Iterson
At 10:10 a.m. most work days on Wall Street, officials at the Federal Reserve wade into the Treasury bond market. For the next 20 minutes, they proceed to snap up bonds of all shapes and sizes. They’re impervious to price moves, and they never sell. An indiscriminate bond-buying machine, they’ve now amassed a $5.5 trillion stockpile of the debt.
This is a staggering sum, equal to more than 10 times the amount the Fed owned before the Great Recession and quadruple the amount held by any other investor. All of this buying comes in the name of injecting money into the economy and driving down interest rates to ward off collapse, first in 2009 and again after the pandemic hit. Which is a reasonable and noble endeavor—central bankers all over the world have pursued similar policies—but in the process, the Fed has come to dominate the bond market to such a degree that no other voice seems to matter nowadays.