Treasury Markets Are Drying Up, But Stablecoin Issuers Say They're Still Liquid
BS
Ben Strack
17 Mar 2023 10:49 AM
Stablecoin issuers allocate reserves toward short-dated Treasury securities, which serves them well in the current market environment...
- Liquidity in the US Treasury market has fallen due to stresses across the banking sector.
- Bid-ask spreads on two-, 10- and 30-year US government bonds have jumped to the highest level in at least six months.
- Stablecoin issuers are more protected from a decrease of liquidity in Treasury bonds due to their higher allocation of reserves invested in short-dated Treasuries securities.
- Most top stablecoins work to have an amount of fiat currency or other similarly liquid assets equal to stablecoins issued.
- Circle and Tether, two major stablecoin issuers, have shown good liquidity risk management by keeping the majority of their reserves in short-dated securities.
The article presents a positive sentiment towards stablecoin issuers, as they are more protected from a decrease of liquidity in Treasury bonds due to their higher allocation of reserves invested in short-dated Treasuries securities. The article also highlights the good liquidity risk management of Circle and Tether, two major stablecoin issuers.
Related Questions
What is the bid-ask spread in the US Treasury market?
How are stablecoin issuers protected from a decrease of liquidity in Treasury bonds?
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What risk management processes have Tether developed for their portfolio?
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