With U.S. government debt skyrocketing and Treasury securities all but immune to the credit risk plague, might institutions hire more traders and analysts with Treasury market experience?
For the past decade and a half, the relatively staid Treasury market was overshadowed by a series of newer instruments. Innovations like credit derivatives carried more pizzazz for trading and hedging, and generated far more profits for dealers. As a result, knowledge of the Treasury market came to be viewed as a plain-vanilla skill that didn't add cachet to a resume.
Now, the breakdown in other credit markets, the explosion in Treasury debt, and the disappearance of several prominent dealer firms from the Treasury market have the potential to bring Treasury expertise back to the forefront.
There's little concrete evidence that's occurring yet, one recruiter tells eFinancialCareers News. "Fixed income is still contracting," observes Craig Stocksleger, head of fixed-income at Comprehensive Recruiting, in Tempe, Ariz. Within the broad fixed-income category, he says the area doing relatively best right now from a hiring perspective is foreign exchange - not Treasuries.
Rebirth of the (Treasury) BSD?
However, a Bloomberg News story Tuesday suggests several reasons that could change:
- The U.S. Treasury and the Federal Reserve are seeking to enlarge the list of "primary dealers" that bid directly at the Treasury's debt auctions. The disappearance or merger of several top-tier U.S. banks has shrunk that list to just 16 companies - raising the risk that some future auction might not attract enough bids. (A firm that's designated a primary dealer is required to submit its own bids whenever the Treasury auction a new security.)
- Jefferies & Co., MF Global, Nomura Securities International and RBC Capital Markets are among firms currently negotiating to become primary dealers, Bloomberg says.
- In the past 12 months, Lehman Brothers, Bear Stearns, Countrywide Securities and Merrill Lynch ceased being primary dealers. The Treasury market has suffered more frequent and persistent episodes of illiquidity since last September, due in part to the disappearance of those dealers.
- Thanks to wider bid-offer spreads, "There's money to be made in Treasuries," Jefferies government bond trader Tom di Galoma told Bloomberg News.
- The U.S. is expected to sell more than $2 trillion in new Treasury debt this year.