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Inexplicable spikes still imperil Treasury market: Fed's Brainard

Key Points
  • 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

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."

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Key Points
  • Treasury Secretary Steven Mnuchin says President Trump was pleased with Fed Chairman Jerome Powell's speech last week on interest rates.
  • Powell said rates are "just below" neutral, easing investor worries about a more aggressive interest rate .