Oct. 24 (UPI) — The U.S. Treasury is working on reforms to strengthen private money markets and bond funds amid rising uncertainty about the global economy, according to Treasury Secretary Janet Yellen.
Yellen made her remarks Monday at the Securities Industry and Financial Markets Association’s annual meeting in New York, and warned that despite significant stresses to the U.S. financial system, the markets have proven stable so far.
“To date, the U.S. financial system has not been a source of economic instability,” Yellen said. “While we continue to watch for emerging risks, our system remains resilient and continues to operate well through uncertainties.
“While yields for U.S. bonds, which Yellen called the “bedrock of the global financial system,” have been rising along with interest rates, the market also is being hit with higher transactions costs and lower liquidity levels as inflation continues to soar.
Earlier this month, the Bank of England announced additional interventions into its bond market to restore confidence, after inflation soared as high as 13% in Britain this year.In the past few weeks, the U.S. stock market has endured large swings due to high inflation and rising interest rates. While the Dow Jones Industrial average has rebounded since last month, it is still down almost 14% this year.
“We want to make sure that going forward our Treasury markets remain deep, liquid and well-functioning,” Yellen said.
“We are working actively to try to bolster the functioning of that market to carefully look at what might be appropriate. I think the ability of broker-dealers to intermediate that market — their capacity has not grow in line with the size of the market. So we’re looking at a number of ways to improve resilience.”
As the Treasury works to strengthen the market, Yellen said “we are at an important moment for the global economy,” adding that the top priority for the United States is to rein in high inflation and energy costs.
“In the United States, we are focused on transitioning our economy to stable and sustained growth. The U.S. economy retains significant strength,” Yellen said. “But inflation remains too high, and we are contending with serious global headwinds.”
