Question

1. What happened in the 1990s that explains the small decrease in the size of the U.S. Treasury markets pre-2000?
2. What happened in the early 2000s that reversed this decrease?
3. What caused that large growth in the Treasury market starting in 2007/2008?

Answer 1

Answer 1

Increase in inflation rate was the main factor in 1990 for fall in US treasury markets as the borrowing of money was not easy and most of the major banks where deficit, the economy was weekend this led to insecurity among the investors which led to decrease in US treasury market.

Answer 2

In 2000 US federal body came with solution wherein they changed the monetary policies and sold Us treasury bonds on discounted price. Also they came with a 30 years treasury instrument with high returns which help the decrease in US treasury market reversed in early 2000

Answer 3

As the Lehman brother collapsed in 2007/2008 which caused global recession the investors where feeling insecurity to invest in other markets as the recession was globally there was a drastic change in the interest rate and lending for the financial institutions hence in this phase the more securitised market was US treasury market as it was a government owned with a good rate of return hence most of the investors turned toward the US treasury market simultaneously increasing the growth of US treasury market.