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  3. Journal of Economic Perspectives
  4. Spring 2025
  5. A Hitchhiker's Guide to Federal Reserve Participation in Fixed Income Markets

Journal of Economic Perspectives

ISSN 0895-3309 (Print) | ISSN 1944-7965 (Online)

A Hitchhiker's Guide to Federal Reserve Participation in Fixed Income Markets

  • Nina Boyarchenko
  • Or Shachar
Journal of Economic Perspectives
vol. 39, no. 2, Spring 2025
(pp. 171–94)
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Abstract

We review US dealer-intermediated fixed income markets, including Treasuries, agency mortgage-backed securities, corporate bonds, and municipal bonds. Through the lenses of primary dealers' positions, we show these markets' evolution over the past decade and the effects of recent episodes of abrupt deterioration in market functioning. We then overview how the Federal Reserve interacts with fixed income markets for the purposes of monetary policy implementation and liquidity interventions. We conclude by discussing the shifting composition of investors in US fixed income markets, and what consequences such changes in the investor base may have for monetary policy transmissions.

Citation

Boyarchenko, Nina, and Or Shachar. 2025. "A Hitchhiker's Guide to Federal Reserve Participation in Fixed Income Markets." Journal of Economic Perspectives 39 (2): 171–94. DOI: 10.1257/jep.20241436

Additional Materials

JEL Classification

  • E52 Monetary Policy
  • E58 Central Banks and Their Policies
  • G12 Asset Pricing; Trading Volume; Bond Interest Rates
  • G41 Behavioral Finance: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets [Neurofinance]