US debt fears raise heat on Treasury bills as collateral

Singapore — Some financial institutions are reducing the use of US Treasury bills as collateral for transactions in stocks and swaps as they prepare for the possibility of a US government default.

Hong Kong’s securities exchanges announced last week they will apply a bigger discount on the US Treasuries used as margin collateral.

Traders and risk officers at banks said they were carefully monitoring portfolios and collateral, with some putting contingency plans in place to deal with default or a sudden loss of liquidity in the securities, the world’s most risk-free assets after cash.

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