The Fed Governor Christopher Waller doesn't have time for complaints that the liquidity in the most important financial market U.S. Treasury securities isn't deep enough.
Waller made a point that bank usage of the reverse repo facility results in trillions of dollars worth of securities being handed over to the Fed every day, according to a transcript of a question and answer session after his Thursday speech by Wall Street Journal reporter Nick Timiraos.
The markets are handing us $2.2 trillion worth of liquidity that they don't need, he said. I have a hard belief that I need to step in and do something on liquidity concerns when there is $2.2 trillion they can take back at any time they want to redistribute. People aren't willing to pay the price that you're selling at when people say the Treasury market isn't liquid. Okay, well, lower the price. If people aren't willing to lower the price, that means they're happy to hold the security. He joked that the market liquidity for pumpkins is very high on October 31, but on November 1 the market liquidity goes to zero. He said that I m not going to step in and try to fix the pumpkin market. Other officials have been more concerned. The Office of Financial Research pointed out earlier this year that the market is dependent on a small pool of dealers who may become more constrained during times of crises, and reliance on market-based financing can cause stress.