It was mid-February when trading of U.S. Treasuries, arguably the most important assets in the global financial system, started to go haywire. Soon, alarm bells were ringing at the Federal Reserve.
Benchmark yields were moving at breakneck speeds and would drop more than a full percentage point by early March. Investors went on to aggressively sell off-the-run Treasuries, securities that are older than the recently auctioned notes and bonds which set benchmark rates. Volatility was surging as liquidity disappeared, forcing dealers to take on more positions than they possibly could move through markets.