Balance Sheet Capacity and Cross-Strategy Treasury Arbitrage: SLR Exclusion Event Study

Regulatory leverage constraints are a leading candidate explanation for limited intermediation in U.S. Treasury markets. In this paper, I exploit the Federal Reserve's temporary exclusion of U.S. Treasury securities and Federal Reserve deposits from the Supplementary Leverage Ratio (SLR) denominator (April 1, 2020 to March 31, 2021) to test whether SLR relief differentially compressed Treasury-based arbitrage spreads relative to non-Treasury controls. Using a pooled difference-in-differences des