New York Fed’s blog series on market liquidity launches today

By Lisa M. Goolik, J.D.

The Federal Reserve Bank of New York's Liberty Street Economics blog is planning a series this week that explores and discusses different facets of the "evolving nature of market liquidity." Last week, the New York Fed announced that the series would begin today and run through Friday, Aug. 21, 2015.

Series lineup. Throughout the week, the blog series will present different dimensions of market liquidity. The five blog posts that are slated to appear are:

• "Has U.S. Treasury Market Liquidity Deteriorated?"
• "Liquidity During Flash Events"
• "High Frequency Cross-Market Activity in U.S. Treasury Markets"
• "The Evolution of Workups in the U.S. Treasury Securities Market"
• "Dealer Balance Sheet Stagnation"

Market liquidity. Today's post, "Has U.S. Treasury Market Liquidity Deteriorated?", authored by Tobias Adrian, Michael Fleming, Daniel Stackman, and Erik Vogt, explores whether there is any evidence of a sustained reduction in Treasury market liquidity. According to the authors, the bid-ask spread, which is one of the most direct liquidity measures, suggests ample liquidity, while other indicators suggest some deterioration. However, the authors conclude that overall, the evidence is "fairly favorable" about the current state of Treasury market liquidity.

The authors also suggest that perhaps the liquidity concerns are not so much about average liquidity levels but about liquidity risk, caused by the recent events, such as those on Oct.15, 2014, and the "seemingly unexplained price changes in the dollar-euro and German Bund markets. The authors indicate that they will attempt to measure liquidity risk in a future post.

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