Gaps between prices where traders buy and sell have yawned wider and huge moves in price, on a scale unthinkable even a year ago, have become commonplace.
Bank of America has described Treasury market strains as “arguably . . . one of the greatest threats to global financial stability today, potentially worse than the housing bubble of 2004-2007.”
The widely circulated paper, co-authored with former Reserve Bank of India governor Raghuram Rajan, centred on how quantitative tightening and easing affects market liquidity. In the 2019 and 2020 crises, QT “was the likely deeper cause that left the system vulnerable”, they wrote.
FT 14 September 2022