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Matt Levine

People Are Worried About Bond Market Liquidity

As you might have heard.

Attentive readers have noticed that my morning newsletter often contains the sentence "People are worried about bond market liquidity." A Google search finds 16 instances of that phrase, and we're adding at a frenetic pace. I had to double up on liquidity worries in both today's and yesterday's newsletters: You've got ICAP, JPMorgan and Deutsche Bank worrying about Treasury volatility, Gary Cohn and Anshu Jain worrying about bond fund liquidity, and Nouriel Roubini worrying about all sorts of liquidity. And here's Pimco worrying about flash crashes, shortly after the cut-off for today's newsletter. People are worried about bond market liquidity, is the point I'm trying to make here.

Should they be? I don't know. I don't even entirely know what the question means; it is really an assortment of interrelated questions. (What even is the "bond market"? Corporates? Treasuries? Loan ETFs?) Still I figured I would make a series of disconnected observations here, since this stuff keeps coming up. When I first wrote about this a few months ago, I said that I was looking around for a framework for thinking about the issue, and these observations might add up to a very rough framework. It's probably wrong! So, you know, please tell me about that.