I review the functionality of the secondary market for U.S. Treasuries in March 2020, when the Covid-19 crisis triggered investor flows that overwhelmed intermediaries. Although the Fed was able to largely restore market liquidity through its unprecedented rate of Treasury purchases and other actions, the design of the Treasury market was revealed to be overdue for an upgrade. I propose a study of the costs and benefits of mandating the central clearing of Treasury transactions of all firms that are active in the market. Without a broad central clearing mandate, the size of the Treasury market will outstrip the capacity of dealers to safely intermediate the market on their own balance sheets, raising doubts over the safe-haven status of U.S. Treasuries and concerns over the cost to taxpayers of financing growing federal deficits.
