As a consequence of these changes, trading in Treasury markets now moves at extreme speed. It may be that these changes have also led to greater liquidity risk, or sudden declines in liquidity.
Researchers at the FRBNY have shown that spikes in volatility and sudden declines in liquidity have become more frequent in both Treasury and equity markets.2 There is also evidence that liquidity shifts more rapidly and hence is less predictable in these markets.3 In contrast, researchers have not found evidence of these behaviors in corporate bond markets, where traditional dealers still intermediate most trades and there is much less high-frequency trading.4  1  See Joint Staff Report: The U.S. Treasury Market on October 15, 2014 (PDF), U.S. Department of the Treasury, Board of Governors of the Federal Reserve System, Federal Reserve Bank of New York, U.S. Securities and Exchange Commission, U.S. Commodity Futures Trading Commission, July 13, 2015, and Conference Summary: The Evolving Structure of the U.S. Treasury Market (October 20-21, 2015) (PDF) , Federal Reserve Bank of New York, October 20, 2015.