By Michelle Price

WASHINGTON, (Reuters) – U.S. regulators are evaluating potential ways to increase the resilience of U.S. Treasury markets, such as improving market data quality and increasing supervision of trading venues, and introducing central clearing. According to a Treasury Department report, Monday.

Treasury securities are the largest market in the world and serve as the benchmark asset class for the global financial system.

However, investors were gripped by pandemic fear in February and March 2020. As a result, Treasury market liquidity quickly deteriorated back to 2008 crisis levels. The U.S. Federal Reserve bought $1.6 trillion worth of Treasuries in an effort to improve stability.

Some disruptions were also seen in areas that appeared to be more normal.

Environments,” said the Treasury on Monday.

Under the direction of the Treasury, the Inter-Agency Working Group for Treasury Market Surveillance includes the Fed and regulators in the markets. It has explored ways to strengthen the market’s resilience during times of stress.

Monday’s report contains an overview of areas that regulators are currently exploring and flags five workstreams.

This includes the role of big market dealers as intermediaries, who struggle to keep pace with the huge Treasury debt issuance. One of the possible changes is to modify a capital rule that banks claim restricts their ability deal and hold Treasuries.

Also, regulators will examine whether or not market data regarding positions and transactions is better. This includes whether Treasury trades should go through central clearing houses to improve the risk management.

Regulators are also analyzing the market’s role in open-ended fund investing and other investors. They will be looking into whether the markets ran on these funds and whether Treasuries were sold to satisfy redemptions and margin calls.