Fed looking at bond liquidity, some evidence less resilient than in past: Brainard

The Fed is in the early stages of an analysis on changes in bond market liquidity, amid signs that liquidity may be less resilient than in past, Fed Governor Lael Brainard said on Wednesday.

Brainard, in remarks prepared for delivery in Austria, said an upcoming study on last October's flash crash in bonds would shed some light on how Treasury markets work, but that there was more yet to learn.

Prominent market participants, including Allianz's Mohamed El-Erian, have warned in recent months that investors were underestimating liquidity risks.

Former Treasury Secretary Larry Summers also said earlier this year that regulators needed to be more focused on liquidity risks.

Brainard, in her remarks, also warned that markets increasingly dominated by high-frequency trading may be less able than in past to deal with large market shocks.

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