Regulations aimed at reducing the risk of another financial crisis are starting to upend a key part of the bond market that expedites trading in everything from Treasuries to junk bonds.

The U.S. repurchase, or repo, market where banks and investors borrow and lend Treasuries and other fixed-income securities shrunk to $4.6 trillion daily outstanding last month, down 35 percent from a peak of $7.02 trillion in the first quarter of 2008, based on Federal Reserve data compiled from its 21 primary dealers.


"Leverage ratios will leave dealers less willing to provide repo financing and to hold U.S. Treasuries," according to the TBAC, which is made up of bond dealers and investors ranging from Goldman Sachs Group Inc. in New York to Newport Beach, California-based Pacific Investment Management Co., which manages $2 trillion, including the world's largest bond fund.

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