Signs of deterioration in U.S. Treasuries liquidity: N.Y. Fed blog

[August 17, 2015]  NEW YORK (Reuters) - There are some signs of decline in liquidity in the U.S. Treasuries market, though overall, how easily government securities can be bought and sold remains "fairly favorable," according to a New York Federal Reserve blog post on Monday.

Traders have been concerned about Treasury market liquidity amid speculation over whether the Federal Reserve will raise interest rates, perhaps as early as September.

"Direct measures such as the bid-ask spread point toward liquidity that is quite good by recent historical standards. Other measures such as quote depth and price impact imply some recent deterioration in liquidity, albeit from unusually liquid conditions," New York Fed analysts Tobias Adrian, Michael Fleming, Daniel Stackman and Erik Vogt wrote in the post.

A measure of decreased liquidity is less market depth, which is defined as the average quantity of Treasuries for sale or purchase at the best bid and offer prices, the analysts said.

While depth improved after the global financial crisis, they fell "markedly" during the 2013 taper tantrum and the "flash crash" on Oct. 15, 2014, the analysts said.

Monday's post is the first of a six-part series that looks at the "evolving nature of market liquidity."

For more, click on ((http://nyfed.org/1fkndby))

(Reporting by Richard Leong; Editing by Bernadette Baum)

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