The Treasury market's path forward

Chapter 17 analyzes the evolving future of the U.S. Treasury market in the context of rapidly rising public debt, expanding fiscal deficits, and growing demands on market infrastructure. The chapter reviews how persistent and projected increases in debt raise concerns about market sustainability, crowding out, and the burden of interest payments. It examines the sources and resilience of demand for Treasuries, including domestic savings, economic growth, safe-haven flows, central bank purchases, index investing, basis trading, and regulatory mandates for high-quality liquid assets. Recent regulatory reforms, such as mandatory central clearing and enhanced reporting, are discussed as key measures to modernize the market, mitigate risk, and prepare for continued growth. The chapter also explores the transformative potential of tokenization and digital innovation, highlighting the ongoing integration of technology and policy in supporting a resilient, accessible, and scalable Treasury ecosystem.