Inexplicable spikes still imperil Treasury market: Fed's Brainard

  • Brainard, addressing a market structure conference at the New York Fed, said a stable Treasury market is vital as the central bank continues to trim its bond portfolio with the U.S. economy "at or beyond" full employment and inflation "around target."
  • "Markets have been able to weather several episodes of short-lived market turbulence well in the past few years," Fed Governor Lael Brainard said in prepared remarks.
Lael Brainard, Federal Reserve Governor
Andrew Harrer | Bloomberg | Getty Images
Lael Brainard, Federal Reserve Governor

Four years after the so-called "flash rally" spooked U.S. investors and regulators, the Federal Reserve remains concerned that the U.S. Treasury market still occasionally moves sharply without any apparent reason, a top Fed official said on Monday.

"Markets have been able to weather several episodes of short-lived market turbulence well in the past few years," Fed Governor Lael Brainard said in prepared remarks.

"But the fact that sharp market movements...can occur even in the absence of clear news drivers remains a concern and highlights the potential risks to financial stability posed by the high-speed transmission of price and liquidity shocks across multiple markets and trading venues," she added.

Brainard, addressing a market structure conference at the New York Fed, said a stable Treasury market is vital as the central bank continues to trim its bond portfolio with the U.S. economy "at or beyond" full employment and inflation "around target."