(Bloomberg) -- High-frequency traders haven't taken over Treasuries, according to data just released by a senior U.S. government debt manager, a sign banks still call the shots in the world's largest bond market.
These automated market makers have bought and sold about $140 billion of Treasuries a day since April, 20% of total volume, Deputy Treasury Secretary Justin Muzinich said Monday during a speech in New York. These companies -- the U.S. calls them “principal trading firms,” or PTFs -- are dwarfed by the trading dealers do with their customers and each other.
Michael Lewis's 2014 book, “Flash Boys,” and articles through the years have shown high-frequency traders have spread most everywhere in finance. And while they dominate some assets like stocks, the Treasury market is a major exception.
Popular interest in algorithmic trading and the PTFs that do it has overshadowed “how large and significant” the dealer-to-customer segment still is, Muzinich said at the Federal Reserve Bank of New York's annual U.S. Treasury Market Conference.
More From Muzinich: U.S. Recommends Release of Treasuries Trading Volume Statistics
That said, PTFs do much of the business on the electronic venues where they mostly trade, accounting for about 60% of the volume there in April through August, Muzinich said. About 30% of the volume had PTFs on both sides of the trade, with an additional 55% having a PTF on one side.
In general, the interdealer market handles larger volumes in actively traded bonds -- those dubbed on-the-run -- than the dealer-to-customer market. For off-the-run securities -- older bonds -- more of those trades are done dealer-to-customer. Of the $3 trillion of nominal notes and bonds traded during the week ended Aug. 30, $2.14 trillion (71%) were on-the-run issues, while $861.7 billion (29%) were off-the-run.
“Treasury believes that a better understanding of how much volume is passing through the market, particularly in off-the-runs, should encourage even greater interest in those securities,” Muzinich said.
| Treasury Weekly Volumes in $billions, week of Aug. 30, 2019 | |||
|---|---|---|---|
| Interdealer | Dealer-to-Customer | Total | |
| BILLs | 137.7 | 338.2 | 475.9 |
| FRNs | 2.1 | 8.8 | 10.9 |
| Nominal Coupons | 1,727.0 | 1,274.3 | 3,001.3 |
| <=2yrs | 356.2 | 299.0 | 655.1 |
| On-the-run | 270.5 | 131.5 | 401.9 |
| Off-the-run | 85.7 | 167.5 | 253.2 |
| >2 yrs and <=3yrs | 193.6 | 113.6 | 307.3 |
| On-the-run | 166.7 | 67.0 | 233.7 |
| Off-the-run | 26.9 | 46.6 | 73.5 |
| >3yrs and <=5yrs | 509.4 | 370.7 | 880.0 |
| On-the-run | 432.9 | 229.3 | 662.2 |
| Off-the-run | 76.5 | 141.3 | 217.8 |
| >5yrs and <=7yrs | 154.3 | 112.3 | 266.6 |
| On-the-run | 126.0 | 52.4 | 178.4 |
| Off-the-run | 28.3 | 59.9 | 88.2 |
| >7yrs and <=10yrs | 388.5 | 222.2 | 610.8 |
| On-the-run | 357.4 | 170.9 | 528.3 |
| Off-the-run | 31.2 | 51.3 | 82.4 |
| >10yrs | 124.9 | 156.6 | 281.5 |
| On-the-run | 83.3 | 51.6 | 134.9 |
| Off-the-run | 41.6 | 105.0 | 146.6 |
| TIPS | 22.8 | 38.8 | 61.6 |
| <=5yrs | 9.6 | 16.7 | 26.4 |
| On-the-run | 6.8 | 5.8 | 12.7 |
| Off-the-run | 2.8 | 10.9 | 13.7 |
| >5yrs and <=10yrs | 9.6 | 13.7 | 23.3 |
| On-the-run | 8.0 | 5.6 | 13.6 |
| Off-the-run | 1.6 | 8.1 | 9.7 |
| >10yrs | 3.6 | 8.3 | 11.9 |
| On-the-run | 2.9 | 4.8 | 7.8 |
| Off-the-run | 0.7 | 3.5 | 4.1 |
| Total | 1,889.5 | 1,660.2 | 3,549.7 |
Source: U.S. Treasury Department
--With assistance from Liz Capo McCormick.
To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net
To contact the editors responsible for this story: Benjamin Purvis at bpurvis@bloomberg.net, Nick Baker, Mark Tannenbaum
©2019 Bloomberg L.P.
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