US Treasury market’s brush with disaster must never be repeated
Fed tamed the chaos in March but must take further action to buttress future solidity
The US government bond market is akin to the investment world’s bomb shelter, a safe space where everyone can seek refuge when the rest of the financial system is exploding. In March, the bomb shelter itself started to rumble ominously.
Treasuries are easily the biggest and most traded fixed-income securities on earth. Thanks to their safety, liquidity and the American dollar’s status as the global reserve currency, they are the world’s “risk-free” rate, the default haven, and facilitate a vast amount of financial transactions.
However, the coronavirus crisis caused trading conditions in the normally well-behaved US government bond market to deteriorate dramatically in March.
Source: Financial Times