When the Treasury market works, everything else has a shot at working too. When it breaks, the ripple effects are massive. Right now, it’s starting to break. When a financial system can no longer stand on its own, it leans on illusion. That’s what the June 18, 2025, quiet regulatory move was really about. Most people didn’t see it. That’s not a knock on them — it’s by design. The headlines were filled mostly with war and politics. Meanwhile, the real news came wrapped in beige. A footnote in a press release. A whisper in financial regulatory circles. But don’t let the silence fool you. What just happened was loud — deafening, if you know how to listen. Here’s the short version: On June 18, 2025, federal regulators proposed easing capital rules for banks. Specifically, they want to loosen the Supplementary Leverage Ratio (SLR), a rule that forces big banks to hold capital against their assets, including U.S. Treasurys. Translation: Banks can now load up on government debt without needing to hold extra cash in reserve. No penalty. No capital buffer. No friction. If that sounds technical and boring, stay with me because, under the hood, this is something else entirely. This is a quiet admission that the Treasury market — the bedrock of the global financial system — is starting to buckle. And we’re out of clean fixes. THE CRACKS BENEATH THE SURFACE To understand why this matters, you need to know what the U.S. Treasury market really is. It’s not just where the government borrows money. It’s the foundation of global finance. Treasurys are considered “risk-free” assets. They’re used as collateral in just about every corner of the financial system — from home mortgages to hedge fund leverage. When the Treasury market works, everything else has a shot at working too. When it breaks, the ripple effects are massive. Right now, it’s starting to break. The U.S. is issuing $1-2 trillion in new debt every quarter. That’s not a typo. Every quarter. At the same time, major foreign buyers — China, Japan and others — are stepping back. Some are outright selling. By Christopher Myers, CEO B:Side Capital and B:Side Fund, ICBC Associate Member Pension funds can’t keep up. Insurance companies are maxed out. Retail demand is inconsistent. There’s just too much debt chasing too few willing buyers. So yields rise. Volatility increases. And liquidity — the ability to buy or sell large amounts without moving the price — starts to disappear. That’s where regulators stepped in. A QUIET BACKDOOR Instead of fixing the core problem — too much debt, not enough demand — regulators did something else. They relaxed the rules that prevent banks from binging on Treasurys. It’s not quite a bailout, but it’s close. It’s a quiet version of yield curve control. The government is nudging banks to buy more of its debt, without saying that out loud. It’s not being done through the front door, like a formal Fed policy. It’s being done through the back door — in the plumbing of financial regulation. And that should make you pause because this kind of move doesn’t happen when things are fine. It happens when confidence is fading, when the people behind the curtain start to worry that the system can’t hold. NOT A POLICY SHIFT — A CONFESSION What happened on June 18, 2025, wasn’t a new policy. It was something more honest. It was a confession — a recognition that the market can’t stand on its own anymore. That real demand for Treasurys is drying up. And that someone — anyone — needs to step in and buy. But because it can’t be the Fed directly (at least not yet), it has to be the banks. And INDEPENDENT REPORT | 11
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