Search for other papers by International Monetary Fund in
Current site
Google Scholar
Abstract
The U.S. Treasury enjoys several advantages over other countries in managing debt. Federal debt issuance is a relatively small percentage of total domestic debt issuance, so financial markets easily absorb changes in the government’s borrowing needs. The depth of private markets also allows the government to borrow solely in domestic currency. The sophistication of domestic financial markets allows the government to rely on the private sector for a range of activities that increase the liquidity of treasury securities. The wide breadth of participation in treasury auctions makes uniform-price auctions feasible. Underlying these advantages is the additional advantage of a large, diverse economy that assures investors that debt will be repaid. Many of these advantages have become self-reinforcing: As market depth and breadth have increased, more market participants have been willing to rely more on treasury securities.
International Monetary Fund Copyright © 2010-2021. All Rights Reserved.