All articles tagged with #bond market liquidity
The $30 trillion US Treasury market is showing signs of strain as the Iran war drives broader market volatility and thinning liquidity, with market depth shrinking, electronic trading disrupted, and shorter-dated notes and inflation-linked Treasuries most affected, while auctions underperform and traders reassess the Fed’s rate path.
The US Treasury is expected to increase the size of auctions for bills, notes, and bonds in the fourth quarter to fund a worsening budget deficit. Concerns about the deficit have contributed to a sharp rise in long-term Treasury yields. The deficit is growing due to factors such as higher borrowing costs and quantitative tightening. Analysts project a deficit expansion to $1.85 trillion in 2024. The Treasury is also likely to announce a buyback program to improve bond market liquidity. The latest refunding may see a focus on shorter-term bills, while the increase in long-term issuance could shrink.