The Mechanism
Washington's deficit doesn't just borrow money — it creates a captive market. The Treasury is legally required to sell its debt through a network of roughly two dozen primary dealers: banks and broker-dealers that are obligated to bid at every auction and to make continuous secondary markets in government securities. As the federal government runs multi-trillion-dollar deficits and coupon auction sizes edge toward a $1.3 trillion funding shortfall projected for FY2027–28, more paper has to move. More paper moving means more bid-ask spread captured, more repo book turnover, and more client facilitation revenue — all without taking directional interest-rate risk. Fiscal expansion, in this corner of the market, is a volume business.