Treasuries Are the Easiest Thing to Sell? A New York Fed Advisor on the Plumbing of the Bond Market | Macro Musings Notes
Listening notes on Macro Musings with New York Fed Treasury advisor Ellen Correia Golay: how off-the-run Treasuries lose liquidity as they age, and what all-to-all trading, central clearing, and transparency are each trying to fix. Educational notes only, not investment advice, and no securities are recommended.
Contents
The market is the measure of goods.
— Guanzi, “Cheng Ma” (Warring States; author’s translation)
A market is where goods get their price, and the US Treasury rate is the benchmark the whole world uses to price money. This episode is about the plumbing under that benchmark: who matches buyers and sellers, whose balance sheet holds the bonds in between, and which section clogs first under stress.
What this episode is about
On the September 21, 2026 episode of Macro Musings, David Beckworth brings back Ellen Correia Golay. She’s a lead Treasury advisor in the Markets Group at the New York Fed, and she also oversees the Treasury Market Practices Group, a group of market professionals that promotes best practices in trading. On top of that, she represents the New York Fed on an inter-agency working group with staff from Treasury, the Board of Governors, the SEC, and the CFTC, which studies how to make the Treasury market hold up under shocks. Back in March 2020, during the dash for cash, investors rushed to turn Treasuries into cash, so the Fed bought Treasuries in huge amounts, and she was the person running those purchases on the ground.
Beckworth opens with how they first met. At a Money Marketeers event, she stood between Bill Nelson and Mark Cabana and moderated their debate over the Fed’s reserve system, with the two of them at opposite extremes. Back then it was an academic argument, but now the new Fed chair’s task force and Lorie Logan are both talking about how to shrink the Fed’s balance sheet.
Key takeaways
1. The market grew. The intermediaries did not. The Congressional Budget Office put Treasuries outstanding at about $30 trillion at the end of 2025, with another $26 to $27 trillion expected over the next decade. But Golay points to a Darrell Duffie chart showing that the balance sheet primary dealers (the large firms that deal directly with Treasury and the Fed) use to hold Treasuries has barely grown. Part of that is post-2008 regulation, and part is just how fast Treasuries have been issued. The gap has been filled by more price-sensitive players, like principal trading firms, which trade their own money with fast automated strategies. They weren’t in this market 20 years ago, and today they may account for a majority of electronic cash trading. Officials started paying attention to them after a 2014 flash rally, when yields moved sharply and afterward nobody could explain why.
2. March 2020 jammed because everyone was on the same side. Dealers went in already holding a lot of Treasuries, so when the selling wave arrived they had no room to take more. Golay points out that in other volatile episodes principal trading firms actually traded more, so they don’t always pull back under stress. That time, though, everyone pulled back. Everyone wanted cash, no one was buying, and the Fed stepped in. New York was the epicenter of the pandemic, so her team was running large market operations while moving the whole desk to home setups for the first time. When Beckworth asked if the team had “I survived March 2020” T-shirts, she said, “I should.” I smiled at that one, because it sums up the month in three words.
3. All-to-all trading: any participant can trade with any other. That’s already how equity markets work, but a large part of the Treasury market trades over the counter (privately negotiated, off an exchange), and every trade has to go through a dealer. Anonymity is possible: on inter-dealer platforms like BrokerTec, both the hedge fund and the dealer are trading with the platform and don’t know who’s on the other side. The hard part is matching. Her paper finds that if you’re selling one specific off-the-run security, the odds of finding a buyer within 15 minutes are low, while over a full day about 60 to 70% of trades can be matched. That’s why some people propose an end-of-day batch auction, which pulls buyers and sellers into the same moment. So far, though, no platform has built a successful business around it.
4. Central clearing comes first. In an all-to-all market, having to set up clearing and settlement separately with every counterparty is enough to scare people off. If every trade goes to a central counterparty (an institution that sits between buyer and seller and makes sure the trade settles), it no longer matters who you traded with. The deadline for central clearing in the cash market is this December, and for repo, the market where people borrow cash against Treasuries, it’s next June. About $2 to 2.5 trillion of repo has to move into central clearing, compared with a few hundred billion dollars in cash, and central banks are exempt. When Beckworth asked what she would change with a magic wand, her first answer was all-to-all trading. Her second was agent (or “done-away”) clearing, where you trade with one firm and clear through another, which is common in other markets and rare in Treasuries.
5. Liquidity has a lifecycle. The newest Treasuries are called on-the-runs, and everything older is off-the-run, from a three-month-old note to a 30-year bond with one year left. Together, off-the-runs are about 97% of Treasuries outstanding. Average daily volume falls from $56.3 billion for on-the-runs to $5.5 billion for the first off-the-run and $1.6 billion for the second, and bid-ask spreads widen along the way. The finding I liked most in the paper: when an off-the-run becomes cheapest-to-deliver into a futures contract (the security short sellers will choose to hand over, so everyone trades it), its liquidity improves and beats other off-the-runs of the same age. So liquidity follows trading activity. When people trade a security, liquidity comes back.
6. What that means for policy. Treasury buybacks create trading in off-the-run securities, and central clearing makes settlement easier. The paper didn’t reach a conclusion on issuing fewer, larger securities, and both sides have a case. Larger issues are easier to trade and easier to net on balance sheets, while monthly new issues give finer maturity steps, which helps investors who need to line up their average maturity with a specific date.
7. Transparency and names both change how the market works. At the latest Treasury Borrowing Advisory Committee (TBAC) meeting, a presenting member suggested publishing trade-by-trade data for Treasury bills (short-term debt that matures within a year) and publishing on-the-run data more often. The committee urged caution for off-the-runs and TIPS, because in thinly traded securities, publishing too much information makes it hard for dealers to take the other side. Separately, the New York Fed renamed its “standing repo facility” the “standing repo operations,” and at the same time added an early-morning operation and removed the cap on participation. The new name is meant to tell the market this is an ordinary open market operation you can use whenever it makes economic sense, with no last-resort stigma attached. I thought that was a clever move, and surveys show dealers are now more willing to use it.
Further thoughts
Everyone says Treasuries are the easiest thing to sell. So why couldn’t anyone sell them in 2020?
I used to judge whether something was easy to sell by its trading volume on a normal day. After this episode, I realized that number measures on-the-runs. What most people hold for the long run are off-the-runs: a big institution that buys a Treasury and holds it to maturity ends up holding an off-the-run. The “deepest market in the world” you read about in the news and the bond sitting in your account are two different things.
One layer down, liquidity depends on whether people are trading. The cheapest-to-deliver case shows that an off-the-run of the same age gets traded every day once it’s pulled into futures delivery, and its volume and spreads come back. The reverse also holds: an off-the-run nobody trades looks fine on normal days, and you only find out no one is on the other side on the day everyone wants to sell.
Another layer down is direction. In March 2020, dealers were already full, principal trading firms had pulled back, and there were far more sellers than buyers. Golay is honest about it: even with all-to-all trading and central clearing fully in place, that month would still have been rough, because everyone was a seller. Better plumbing helps things flow. It can’t change the fact that everyone is pushing in the same direction.
I now ask three questions about my own portfolio: Who trades this on a normal day? Who will be trying to sell it on a bad day? Is there a buyer who will show up that day? In 2020, that buyer was the Fed. Most of what I own has no buyer like that.
The 30-year yield hit its highest level since 2007. Alarm or noise?
That headline made the front page of the Wall Street Journal, and it’s hard not to feel nervous reading it. Golay listed three drivers she has heard: uncertainty about the Fed’s long-run policy, growing supply of Treasuries and government bonds worldwide, and inflation that has stayed stickier than expected. Beckworth thinks 5.3% is still moderate given the size of US debt.
The way I break it down is to separate the level of rates from how much stress the plumbing can take. The level moves every day with policy expectations and inflation data, and a lot of that is noise. How much stress the plumbing can take is structural. Treasuries are set to grow by another $26–27 trillion over the next decade while primary dealer balance sheets stay flat. That gap is the structure, and it doesn’t show up in daily yields. You see it when stress hits.
That’s why I found this episode more useful than the rate headlines. It gave me dated events I can check: the cash clearing deadline this December, the repo deadline next June, whether TBAC’s idea of publishing trade-by-trade bill data actually happens, and Treasury’s plan to double its buybacks. Next time I see a “yields hit a new high” headline, I’ll first figure out which of the three drivers it’s about, then check whether the plumbing projects are on schedule. I can’t guess where rates go tomorrow. I can check whether the pipes got fixed.
Resources
- “All-to-All Trading in the US Treasury Market” (2025), co-authored by Golay, including the 15-minute versus full-day matching analysis
- “Liquidity and Trading Dynamics in the Off-the-Run U.S. Treasury Market” (2025), with the evidence on the liquidity lifecycle and cheapest-to-deliver effects
- The New York Fed’s annual Treasury Market Conference (September 22, 2026), including a panel on whether cash in Treasury’s account at the Fed (the TGA) could be invested in repo; a replay is on the New York Fed website
- TBAC minutes and presentations on the US Treasury website
- Darrell Duffie’s work on primary dealer balance sheets falling behind Treasury growth
- Golay’s first Macro Musings appearance in 2024
One thing to take with you
Liquidity means someone is willing to take the other side at the same moment you need out. You only find out how much there is when everyone moves in the same direction.
Here’s something I tried. Pick one thing you believe you can “always turn back into cash or help when you need it.” It could be a used car, some equipment you rarely use, or someone you assume you can always call. Then picture the day when the most people need the same thing at once, like the night before a typhoon, the end of the year, or a week of layoffs at your company. Write down who would be on the other side that day, with a specific name or channel. I got stuck on the third item, and I went and lined up a taker for it.
This article is an educational discussion of investment method. It is not advice to buy or sell any individual security, offers no target prices, and does not analyze any current holding. Investing carries risk; make your own decisions or consult a qualified professional.