CITIC Securities: Relaxing SLR can bring nearly $200 billion in additional demand for US bonds.

CITIC Securities research report stated that the reform direction of relaxing the supplementary leverage ratio (SLR) regulatory rules in the United States is quite certain. The reform plan is expected to be announced and implemented in the coming months. Directly lowering the required baseline values of SLR or narrowing the statistical scope of the SLR denominator can achieve the effect of relaxing regulation. Relaxing SLR regulatory rules can directly improve the liquidity of the US bond market, but it can only bring about an increase in demand for US bonds of nearly $200 billion. We estimate that this increase is roughly equivalent to one-ninth of the outstanding US bond market affected by the potential impact of Section 899 of the "Great Beauty Act". This reform is unlikely to directly promote a significant decline in long-term US bond yields, but it may create upward space for the spread in the US bond market, corresponding basis trading may present investment opportunities.