Treasury-marketplace liquidity is drying up and it’s likely to get even worse. The issue is greater than it seems.
Liquidity in the U.S. bond current market, the world’s most significant, has been deteriorating given that the Federal Reserve commenced boosting fascination rates before this calendar year. The end of large month-to-month bond purchases followed by the start out of quantitative tightening has worsened the issue as the Fed tries to extricate by itself from Treasury and home finance loan marketplaces soon after purchasing a 3rd of every single. Treasury Secretary Janet Yellen lately claimed she was “worried about a reduction of adequate liquidity in the sector,” as Treasury supply booms to fund government paying out but polices limit major economical institutions’ willingness to serve as current market makers. At the very same time, traders see the prospective for one more 2% in fee hikes by March 2023.
Treasury-marketplace liquidity is drying up and it’s likely to get even worse. The issue is greater than it seems.
Liquidity in the U.S. bond current market, the world’s most significant, has been deteriorating given that the Federal Reserve commenced boosting fascination rates before this calendar year. The end of large month-to-month bond purchases followed by the start out of quantitative tightening has worsened the issue as the Fed tries to extricate by itself from Treasury and home finance loan marketplaces soon after purchasing a 3rd of every single. Treasury Secretary Janet Yellen lately claimed she was “worried about a reduction of adequate liquidity in the sector,” as Treasury supply booms to fund government paying out but polices limit major economical institutions’ willingness to serve as current market makers. At the very same time, traders see the prospective for one more 2% in fee hikes by March 2023.
