New technology and regulation in fixed income markets have made it harder to gauge levels of liquidity for Treasuries and corporate debt, and have brought new investment risks, U.S. Federal Reserve Governor Jerome Powell said on Thursday.
In recent years markets have contended with a series of revolutions in borrowing, market structure and federal regulations enacted after the 2008 financial crisis.
These developments have fueled concerns that liquidity is drying up across fixed-income markets, Powell said in testimony before a United States Senate panel adding "although many recent studies have found it difficult to identify such a broad reduction."
"It may be that liquidity has deteriorated only in certain market segments," he said in remarks before the economic policy subcommittee of the Senate's banking committee.
"It may also be that, even if liquidity is adequate in normal conditions, it has become more fragile, or prone to disappearing under stress," he said.