Financial implications of the shrinking supply of U.S. Treasury securities

This article begins by stating that recent improvements in fiscal positions in advanced countries have sharply curtailed the issuance of government securities and created the possibility that government securities could disappear in some countries.

The possibility that this might happen in the U.S. is of striking importance, because of the international role the U.S. dollar plays and because of the widespread perception that U.S. treasury securities have the lowest financial risk (the combination of credit, market, and liquidity risks) among U.S. dollar assets.

This paper analyzes the unique features of government securities and links them to the important role that government securities, in particular the U.S. treasury securities have come to play in national and international financial markets. The paper subsequently identifies and examines financial market-oriented public policy questions raised by the shrinking supply of U.S. treasuries