thus, a 30 year Treasury bond trading at par (i.e. market value = face value = $1000) can create up to $50K of new liquidity/credit! you cannot leverage as much with reserve money. so a $1000 bond can create more liquidity than $1000 cash/reserves

Illya Gerasymchuk 2025-09-05 00:47

maximum liquidity added by bond = market value/haircut so a Treasury security worth $1000 with a haircut of 2%, can create up to $50000 in new credit/liquidity computed using the formula above: 1000/0.02=50000