Felicity Hurley

The U.S. Treasury market, the deepest and most liquid in the world, operates with a peculiar duality: less than 4% of its $30 trillion outstanding debt—comprising the most recently issued Treasuries known as on-the-run securities—drives 65% of daily trading volume. The remaining 96%, consisting of older, off-the-run issues, trades far less frequently, creating a two-tiered market where liquidity and trading dynamics diverge sharply.

The Federal Reserve's aggressive tightening cycle of 2022-23, marked by a 4 percentage point surge in expected policy rates, tested the resilience of emerging market economies (EMEs) in ways few models anticipated. A new analysis by Federal Reserve economists Shaghil Ahmed, Ozge Akinci, and Albert Queralto reveals that the most vulnerable EMEs—those with higher foreign-currency debt and weaker inflation anchoring—outperformed expectations in both financial stability and growth, while their more resilient peers defied predictions in markets but lagged in real activity. The findings challenge conventional wisdom and suggest that the Fed's tightening, driven primarily by inflation concerns, may have had unintended stabilizing effects on fragile economies.

The overnight drift in U.S. equity futures—once a reliable source of returns for liquidity providers—has all but vanished in recent years, according to new research from the Federal Reserve Bank of New York. The phenomenon, which saw a pronounced surge in returns between 2:00 and 3:00 a.m. Eastern time during the European market open, had generated roughly 3.7 percent annualized returns in the decades leading up to 2020. Yet, in the five years since, that pattern has flattened to near zero, challenging long-held assumptions about market microstructure and liquidity dynamics.

Bank runs are a defining feature of financial crises, but their precise role remains contested. Some argue that runs represent a tipping point where minor shocks trigger cascading failures, while others view them as symptoms of deeper systemic weaknesses. Resolving this debate has critical implications for how policymakers respond to financial instability.

Businesses are still adjusting to the new tariff regime, with nearly half of firms that have paid tariffs planning additional price increases to offset costs, according to the latest Federal Reserve Bank of New York regional business surveys. The findings suggest that the inflationary impact of tariffs is not a one-time adjustment but a drawn-out process, with many firms spreading price increases over extended periods due to contract constraints and cautious pricing strategies.

The latest Small Business Credit Survey reveals that last year's tariff hikes have left a clear mark on America's small firms. Nearly two-thirds of retailers and more than half of goods-producing businesses reported that increased tariff costs were a financial headache in 2025—higher than the share blaming broader inflation. In New York, New Jersey and Connecticut the picture is even sharper: 72 % of retailers and 62 % of goods firms said tariffs squeezed margins, underscoring how exposed Main Street is to border taxes on the parts and supplies that keep their doors open.

Within bank holding companies (BHCs), nonbank subsidiaries now account for roughly one in four dollars of U.S. nonbank financial intermediation—a share that has grown steadily since the post-2010 period. Using regulatory filings and an extensive database of organizational structures, economists Nicola Cetorelli and Shohini Kundu reveal that these subsidiaries—ranging from broker-dealers to insurers and finance companies—hold between 20% and 30% of consolidated BHC assets. Broker-dealers form the largest single component, but the trend extends across smaller institutions as well: two-thirds of BHCs with assets between $1 billion and $10 billion operate at least one nonbank subsidiary.

The implementation of Basel III in January 2015 forced U.S. bank holding companies (BHCs) to confront a stark reality: either raise fresh equity at significant cost or find another way to meet stricter capital requirements. For those with complex organizational structures—particularly those housing equity-rich nonbank subsidiaries—the solution was neither to issue new shares nor to shrink their balance sheets, but to reshuffle capital internally. This regulatory arbitrage, as documented by Federal Reserve economists Nicola Cetorelli and Shohini Kundu, reveals how banking firms adapt to capital constraints not through market discipline but through the deliberate movement of equity within their own corporate structures.

Regulators patted themselves on the back after Basel III raised capital requirements for banks, and the numbers justified the celebration. Tier 1 capital ratios climbed, non-performing loans fell, and banks steered portfolios toward safe assets. The data on the banks alone shows the policy worked: balance sheets strengthened without pushing banks into riskier assets to chase returns.

The rapid expansion of the stablecoin market has underscored both its growing importance in the financial ecosystem and the vulnerabilities exposed by traditional financial shocks. Since April 2025, the market capitalization of U.S. dollar-pegged stablecoins has surged by $71 billion—a 30% increase—to approximately $308 billion. This growth coincides with the implementation of the GENIUS Act in July 2025, which established the first federal regulatory framework for payment stablecoins, providing a semblance of oversight in an otherwise opaque sector.