Abstract: The rapid growth of U.S. Treasury debt has raised concerns about Treasury market functioning and dealer intermediation capacity. Using confidential dealer-level data, we study how the Treasury buyback program introduced in May 2024 affects primary dealer inventories and trading. We document persistent specialization among dealers across Treasury maturity segments. Buybacks are associated with declines in dealers’ inventories in the targeted segment, followed by a return toward pre-buyback levels, a pattern observed across the maturity spectrum. These declines account for only part of the securities the Treasury purchases, suggesting that dealers also source securities from their clients. These declines are larger among dealers specializing in the targeted segment and among dealers with less slack relative to their Supplementary Leverage Ratio (SLR) requirements. Trading volumes also tend to rise around buyback operations, consistent with dealers being more willing to intermediate in anticipation of opportunities to shed inventories. Our findings suggest that buybacks temporarily relieve inventory pressures, particularly among specialized and balance-sheet-constrained dealers, potentially supporting continued intermediation in targeted maturity segments.

Abstract: We study the dynamics of credit relationships between small businesses and specialized banks and analyze the real effects of specialization on this important yet understudied segment of the credit market. Using micro-level data on the universe of corporate credit in Belgium, we show that banks leverage their industry specialization to build and retain relationships with small businesses. In the relationship-building phase, banks charge lower rates in their industries of specialization. In the relationship-retaining phase, lenders subsequently raise rates faster in specialized industries, until they charge similar rates regardless of their level of specialization. Specialized banks internalize the intertemporal value of credit relationships, combining both industry knowledge and market power to extract value from their relationships. Small businesses benefit from bank specialization in the long run through higher growth in investment, profitability, productivity, and equity value. The real effects of bank specialization inform policies that could inhibit banks’ incentives to specialize, such as open banking policies.

Abstract: We study the effect of past price movements on selling decisions in the housing market to draw implications about the presence of reference dependence on this market. Using data on the universe of private housing transactions in Singapore, we test a commonly used assumption that homeowners use their unit's purchase price as a reference point when making selling decisions. We decompose a unit's cumulative price change since purchase into a series of annual potential gains and estimate how the timing of these gains affects the homeowner's decision to sell. We rule out the null of the purchase price being a reference point and find that gains occurring early in a homeowner's tenure are the most predictive of selling decisions. Homeowners prefer to hold on to their properties after recent gains, consistent with the presence of momentum on housing markets.