An average of over $910 billion are traded every day in the U.S. Treasury market. In the April post-tariffs sell-off, throughput spiked to $2 trillion a day. By the end of April, US Treasury market trading was up by 26.2% YoY 2024i and that was ahead of the May 19th bond sell-off that sent long-term yields above 5% on the heels of the US credit rating downgrade. In this era of atypical uncertainty, these metrics are disconcerting developments for the long-term health of the economy.
Explosive ebbs and flows from one trading day to the next have bottlenecked operational processes at sell-side institutions as they struggle to monitor leverage, duration, and liquidity risks that come with each trade policy maneuver.
Massive volume spikes can strain operations
Aside from April’s Treasuries trading +26% YoY, SIFMA reported that April equities volumes rose 76% YoY and options volumes 30% YoY. An institution that keeps its datasets accurate across every asset class, currency, activity type, and time zones is best able to handle reconciliations during bursts of activity. From an accounting perspective, leading financial institutions are expected to maintain continuity and accuracy in their operations – even when managing complex client structures and portfolios spanning both public and private markets.
To meet this expectation, senior leaders at sell-side firms are focused on eliminating siloed systems and fragmented datasets. This enables consistent, real-time access to data across risk, compliance, operations, trading, and everything in between. Without it, middle- and back-office systems cannot often break down under volume spikes and rising market complexity- resulting in costly errors like missed compliance deadlines, margin penalties, overcharges on margins, incomplete matching of settlement instructions, the inability to borrow, misstatements on reports, and failed trades.
Managing counterparty risk during liquidity shocks
Reuters reported that margin call demands surged by 35% , and disputes between trading parties rose 25% following the U.S. tariffs announcement in early April. As investors revisit the role of Treasuries in portfolio diversification, many are turning to alternative hedging strategies – such as commodities like gold or crude oil – that ultimately adds further complexity to the operational environment.
For buy-side institutions, resilient collateral management can be the difference between surviving a market disruption and achieving long-term success. Firms that maintain granular visibility into their collateral positions and optimize usage in real time are better equipped to stay nimble as volatility spikes.
Sell-side desks, by contrast, struggle to match this speed and precision. Without the tools to monitor liquidity, cash balances, and collateral across the full client inventory, they face serious constraints in adapting to fast-moving markets.
To avoid being caught unprepared, firms need full transparency into liquidity obligations and a strong foundation for margin management. Preparing for a repricing of fiscal risk.
The risk landscape in 2025 continues to evolve. Last year, the focus was on interest rate volatility and regulatory pressures for capital adequacy. Today, counterparty risk remains a concern, and U.S. fiscal debt sustainability is emerging as another critical variable.
In its April 2025 Financial Stability Report, the Federal Reserve flagged rising concerns over near-term fiscal risks.ii Around the same time, Yahoo Finance reported a warning from a Citi analyst: a sustained move above 5% on the 30-year Treasury yield could trigger a broader repricing of fiscal risk.”iii
If that repricing takes hold, sell-side research, as well as prime brokerage teams, will need to recalibrate fiscal risk models and reassess VaR and beta exposures.iv
In this environment, integrated risk management becomes more than a best practice – it's a necessity. Forward-looking firms are already enhancing their frameworks to address capital and liquidity planning, market shifts, credit exposures, and operational risk in a unified way.
Navigating a new market regime with a data transformation
If banks have not considered evolving their data quality and data management infrastructures, they should feel compelled to do so now as there are no better macroeconomic drivers with the confluence of increased volatility and (generative) artificial intelligence adoption; having a foundation of quality data will have compounding advantages in this new era of accelerated productivity. However, a recent BCG report revealed that only 20% of banks have implemented robust quality frameworks for structured and unstructured data, and only about 10% have clearly and fully documented data that can be easily leveraged by entitled users.v Treasury and liquidity management analysts can use advanced margining and collateral tools to oversee the cost of financing and capital to better manage risk while optimizing cash management, asset-based financing agreements, and cross-currency surplus balances. Additionally, independent margin calculators enable banks to compute interest accruals across all clients from the single source of truth, facilitating stress tests across all scenarios. All the above will not only help institutions adjust their macroeconomic assumptions but also enable them to fortify their balance sheets.
Middle- and back-office systems that fail to keep pace with high-volume spikes and the complexity of today’s dynamic markets are experiencing costly breakdowns, ranging from missed compliance deadlines and margin penalties to inaccurate risk books, margin overcharges, incomplete settlement matching, borrowing constraints, counterparty disputes, reporting errors, and failed trades.
Risk resilience is the new alpha for the sell-side
Even before 2025’s US Treasury bond market disruptions, policymakers had taken notice of the increasing disturbances in 2019 and 2020. The Inter-Agency Working Group on Treasury Market Surveillance (IAWG) – composed of staff from the U.S. Department of the Treasury, the Board of Governors of the Federal Reserve System, the Federal Reserve Bank of New York, the SEC, and the CFTC – set out to enhance the resilience of the U.S. Treasury market. Their goals include central clearing and improving data quality and availability “to collect better information and to disclose more timely and granular information to the public on cash market transactions,” as well as better infrastructure and processes for clearing and settling Treasury transactions.vi
The surge in trading volume, the necessity for risk resilience against market disruption, and the urgent need for real-time data are exposing gaps in legacy systems and inefficient data integration. Sell-side institutions uniquely positioned for longevity will fully modernize middle- and back-office stacks to cloud-native, API-enabled platforms, drive decisions with real-time data analytics to inform important decisions, and re-architect risk management. See our earlier article on how investment banks, prime brokers, and other sell-side institutions are Navigating the Regulatory Ebb: How Banks Can Thrive Amid Uncertainty.
Key Takeaways:
Q1: What triggered the recent Treasury market volatility?
A1: The volatility stemmed from tariff-related, hedge-fund deleveraging and macro events like the US credit rating downgrade, pushing daily trading to $2 trillion.
Q2: How are margin calls and counterparty risks evolving?
A2: Margin calls surged 35% after tariff announcements, and disputes rose 25%, emphasizing the need for adaptive collateral and leverage models.
Q3: Why is operational efficiency critical during surging volumes?
A3: YoY equity and Treasury trading spikes require unified data platforms to prevent errors such as compliance misses, failed trades, and overcharges.
Q4: What risks are institutions facing beyond interest rates?
A4: Institutions must now address fiscal debt sustainability, market repricing, and persistent inflation — all demanding updated fiscal risk models.
Q5: What’s the path forward for risk resilience?
A5: Firms must modernize with cloud-native, API-integrated platforms, implement real-time data analytics, and deploy tools for holistic liquidity and margin management.
