In the long run, therefore, the market should be able to absorb purchases and sales of large absolute magnitude with relatively modest changes in yields. Indeed, long-term yields continued to fall over recent quarters even as foreign official holdings of Treasury securities increased at a slower pace than previously.
Moreover, the banks are also allowed to deploy a very high degree of leverage through mobilisation of deposits, on a relatively small capital base, but subject to meeting certain prudential requirements, such as capital adequacy ratio.