By a bold beard
New York (Reuters) -The Trump Administration Promise to include US long-term Treasury products has strengthened bond market expectations that a long-pleasant regulation change on bank leverage requirements could finally be on the horizon.
Some traders are betting that regulators can focus soon on a review of the Supplemental Leverage Ratio (SLR), a rule that requires large US banks to hold an extra layer of capital absorbs a loss against debt US government and central bank deposits.
The potential policy change would mean that banks would not need to devote as much extra money when they hold secure assets as treasures.
Ultimately, this could help push the US Treasury products lower, some investors and analysts said, by giving banks more freedom to capture treasures and give a likely boost to demand.
The expectation comes after the US Treasury Secretary Scott Bessent last week that President Donald Trump's administration focuses on the content of a 10 year Treasury product, a building block of global financial markets and a benchmark for consumer borrowing costs .
The White House and the Treasury Department did not immediately respond to requests for comments.
Ryan O'Malley, Head of Portfolio Management at DuCenta Squared Asset Management, said a potential SLR review would be positive for the Treasury Market and other debt assets, which would benefit from banks releasing their balance sheets.
“It will increase their demand for treasures and other assets. It will also also strengthen bank credit profile,” he said.
The SLR was introduced as part of regulatory efforts following the World's financial crisis 2008. Over time, however, many Treasury market participants have come to be seen as a major barrier to banks providing liquidity to traders, at especially in times of higher volatility.
The Bank Policy Institute (BPI), a trade association representing large US banks, said in a recent paper that re -grading the ratio would be essential to retain market operation, especially given the hope of raising the debt of the debt Government arises due to major budget deficits in the budget.
“We believe changes to the SLR could be made relatively quickly,” said Francisco Covas, executive vice president and head of research at BPI, at Reuters in an interview.
The SLR should be close to the top of the list of capital priorities for US regulators, Covas added, with reference to the Federal Fund, the Office of the Currency Manager, and the Federal Deposit Insurance Corporation.
Exchange rate spreads over Treasury products have expanded in recent days, a sign that investors are beginning to predict a rule review. Interest rate exchanges allow traders to hedge the risk of interest rate by exchanging float rate for a stable rate, or vice versa.