The Treasury Market Fails a Stress Test

On a hectic day, prices swung wildly, and trading costs rose
The Bank of Nova Scotia in Toronto Photograph by Brent Lewin/Bloomberg

As soon as Charles Comiskey saw what was happening , he turned off his machines. It was still early in the New York trading day on Oct. 15, and investors were already shifting billions of dollars into U.S. government bonds as global markets from Asia to Europe buckled. Because prices were rising and yields falling so rapidly, Comiskey, the head Treasury dealer at Bank of Nova Scotia, realized that he ran the risk of being stuck with losses or unwanted inventory if his computers automatically generated quotes to buy and sell.

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