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15 posts on "Michael Fleming"
October 17, 2023

How Has Treasury Market Liquidity Evolved in 2023?

Decorative photo: close up of the words "The Treasury" on the treasury building showing the top of the columns outside the structure.

In a 2022 post, we showed how liquidity conditions in the U.S. Treasury securities market had worsened as supply disruptions, high inflation, and geopolitical conflict increased uncertainty about the expected path of interest rates. In this post, we revisit some commonly used metrics to assess how market liquidity has evolved since. We find that liquidity worsened abruptly in March 2023 after the failures of Silicon Valley Bank and Signature Bank, but then quickly improved to levels close to those of the preceding year. As in 2022, liquidity in 2023 continues to closely track the level that would be expected by the path of interest rate volatility.

Posted at 7:00 am in Financial Markets | Permalink
April 10, 2023

The 2022 Spike in Corporate Security Settlement Fails

Decorative photo: stock market board with overlay of line and bar chart

Settlement fails in corporate securities increased sharply in 2022, reaching levels not seen since the 2007-09 financial crisis. As a fraction of trading volume, fails that involve primary dealers reached an all-time high in the week of March 23, 2022. In this post, we investigate the 2022 spike in settlement fails for corporate securities and discuss potential drivers for this increase, including trading volume, corporate issuance, fails in bond ETFs, and operational problems.

Posted at 7:00 am in Financial Markets | Permalink
November 15, 2022

How Liquid Has the Treasury Market Been in 2022?

Decorative: dollar bills with water ripple over them

Policymakers and market participants are closely watching liquidity conditions in the U.S. Treasury securities market. Such conditions matter because liquidity is crucial to the many important uses of Treasury securities in financial markets. But just how liquid has the market been and how unusual is the liquidity given the higher-than-usual volatility? In this post, we assess the recent evolution of Treasury market liquidity and its relationship with price volatility and find that while the market has been less liquid in 2022, it has not been unusually illiquid after accounting for the high level of volatility.

Posted at 7:00 am in Financial Markets, Liquidity, Treasury | Permalink
July 14, 2022

The Bond Market Selloff in Historical Perspective

photo: The US Treasury building in Washington DC

Treasury yields have risen sharply in recent months. The yield on the most recently issued ten-year note, for example, rose from 1.73 percent on March 4 to 3.48 percent on June 14, reaching its highest level since April 2011. Increasing yields result in realized or mark-to-market losses for fixed-income investors. In this post, we put these losses in historical perspective and investigate whether longer-term yield changes are better explained by expectations of higher short-term rates or by investors demanding greater compensation for holding Treasury securities.

December 3, 2021

At the New York Fed: Seventh Annual Conference on the U.S. Treasury Market

On November 17, 2021, the New York Fed hosted the seventh annual Conference on the U.S. Treasury Market. The one-day event, held virtually, was co-sponsored by the U.S. Department of the Treasury, the Federal Reserve Board, the U.S. Securities and Exchange Commission (SEC), and the U.S. Commodity Futures Trading Commission (CFTC). The agenda featured one panel on the effects of sudden changes in investor positioning, and two panels discussing proposals to strengthen Treasury market resiliency and improve market intermediation from various public and private sector perspectives. Speeches touched on recommendations from a recent progress report by the Inter-Agency Working Group for Treasury Market Surveillance (IAWG), and efforts to improve market resilience by reforming market structure and regulation. Finally, a fireside chat discussed the importance of increasing diversity of experiences and perspectives within the public and private sectors.

November 30, 2020

Treasury Market When-Issued Trading Activity

Despite the importance of when-issued trading of Treasury securities, and the advent of FINRA’s TRACE database of trading statistics, little is known publicly about the level of WI activity. In this post, the authors address this gap by analyzing WI transactions recorded in TRACE.

Posted at 7:00 am in Financial Markets, Treasury | Permalink
October 23, 2020

At the New York Fed: Sixth Annual Conference on the U.S. Treasury Market

On September 29, 2020, the New York Fed hosted the sixth annual Conference on the U.S. Treasury Market. The one-day event, held virtually this year, was co-sponsored by the U.S. Department of the Treasury, the Federal Reserve Board, the U.S. Securities and Exchange Commission (SEC), and the U.S. Commodity Futures Trading Commission (CFTC). The agenda featured a number of panels and speeches on the effects of the COVID-19 pandemic on the Treasury market in March 2020, the ensuing policy response, and ways that market resiliency could be improved in light of the vulnerabilities revealed. Two speeches also touched on the ongoing transition from LIBOR to alternative reference rates.

Posted at 7:00 am in Financial Markets, Pandemic | Permalink
August 26, 2020

How Does the Liquidity of New Treasury Securities Evolve?

In a recent Liberty Street Economics post, we showed that the newly reintroduced 20-year bond trades less than other on-the-run Treasury securities and has similar liquidity to that of the more interest‑rate‑sensitive 30-year bond. Is it common for newly introduced securities to trade less and with higher transaction costs, and how does security trading behavior change over time? In this post, we look back at how liquidity evolved for earlier reintroductions of Treasury securities so as to gain insight into how liquidity might evolve for the new 20-year bond.

Posted at 7:00 am in Financial Markets | Permalink | Comments (3)
July 1, 2020

How Liquid Is the New 20-Year Treasury Bond?

Fleming and Ruela take a first look at the U.S. government’s new 20-year bond, using a short sample of available data to describe its trading activity and liquidity.

Posted at 7:00 am in Financial Markets, Pandemic, Treasury | Permalink
May 29, 2020

Treasury Market Liquidity and the Federal Reserve during the COVID-19 Pandemic

This analysis zeroes in on the Treasury market in early 2020 to better understand how the Fed’s actions regarding the COVID-19 pandemic evolved in relation to day-to-day market developments.

Posted at 7:00 am in Financial Markets | Permalink | Comments (2)
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Liberty Street Economics features insight and analysis from New York Fed economists working at the intersection of research and policy. Launched in 2011, the blog takes its name from the Bank’s headquarters at 33 Liberty Street in Manhattan’s Financial District.

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