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Tradeweb Lines Up New Benchmark for $16tn Treasuries Market

| Rates
This article originally appeared in the Financial Times here.


Move aims to reduce reliance on informal prices from a range of data providers

Investors and traders in the $16tn US Treasuries market — which sets borrowing costs for the government, while also providing a starting point to price trillions of dollars in other assets — now have a daily “closing
price” to use as an independent benchmark.

Until this point asset managers, clearing houses, banks and traders have relied on informal, composite prices from providers such as Bloomberg or Refinitiv, to keep track of the value of their securities, monitor compliance and manage their portfolios.

Now Tradeweb, a New York based bond and derivatives trading venue, has created a new product in conjunction with IBA, the global benchmark administration business owned by Intercontinental Exchange.

“The global financial system [needs] a reliable price for the day at one moment in time,” said Tim Bowler, president of IBA.

Since 2012, when authorities began doling out billions of dollars of fines to banks for attempts to manipulate vital currency and lending rates, administrators of benchmarks have been forced to tighten standards. The two
companies said the new product, which launches on Tuesday, would be the first benchmark for Treasuries built on principles developed by Iosco, the umbrella group for global markets watchdogs.

Some $500bn is traded in Treasuries each day around the world, with transactions spread across a number of systems. Tradeweb itself handles about $80bn a day in deals related to Treasuries, mainly between banks and large investors, using prices from roughly 30 dealers.

Prices for the new benchmark will be collated from deals on Tradeweb at 3pm Eastern Time, typically the hour large US banks close their books to begin valuations for index pricing. It will be published just before 4pm.

“There’s demand for a closing price from exchange traded funds and passive investors,” said Colm Murtagh, head of institutional rates at Tradeweb. “There’s a large amount of ETF flow that has to be done at the close, to reduce tracking errors.”

The initial closing prices will apply to more than 900 securities including bonds, notes and Treasury bills.

Tradeweb has been operating a similar “closing price” mechanism for the £1.6tn UK gilt market, in conjunction with FTSE Russell, since the government debt office withdrew from that role in 2017.

IBA also operates benchmarks for the Libor lending rate, swap rates and gold and silver prices.

To learn more about Tradeweb ICE U.S. Treasury Closing Prices click here.