Bank regulation fails first big test as bond liquidity evaporates in flash crash

Drought
By Tessa Wilkie
16 Oct 2014

Fund managers and capital markets bankers blamed the lack of liquidity in bond markets, caused by bank regulation, for exacerbating price swings in credit markets and US Treasuries this week. This kind of volatility might just be something investors have to get used to, they warned, writes Tessa Wilkie.

US Treasuries swung violently on Wednesday. The 10 year started the day in the 2.2% area and plunged as low as 1.85% before ending the day at about 2.12%.

That level of reaction suggested the move was exaggerated by a dearth of liquidity, as investment banks have reduced ...

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