Bank of America Global Research discusses the loss of adequate liquidity in the US Treasury market.
"Market liquidity has deteriorated with elevated global macroeconomic uncertainty. This is especially true in the US Treasury market, which is relied upon as one of the deepest and most liquid markets in the world. US Treasury liquidity, as measured by Bloomberg's spline error, and implied volume is now at levels last seen in March '20," BofA notes.
"Treasury Secretary Yellen said last week there has been a "loss of adequate liquidity" in the Treasury market. We agree. The liquidity drop is due to acute macro uncertainty, elevated debt, tight regulations, and some prior UST debt management decisions. The UST market needs tending to retain depth & liquidity. Liquidity is a privilege, not a right," BofA adds.