US Government Bond Liquidity during the COVID-19 Pandemic
15 Pages Posted: 4 Jun 2020 Last revised: 8 Jun 2020
Date Written: June 4, 2020
US government bond illiquidity measures began rising during the last week of February 2020. Several of them surpassed the Great Recession levels during the second week of March. Illiquidity spikes do not seem to match with proposed explanatory events. The illiquidity measures of the most actively traded securities declined after the first Federal Reserve intervention, but normalizing the liquidity of other bonds required the second intervention. Liquidity measures were mostly back to normal by late April. The inflation-linked bonds illiquidity spike was milder but more persistent and less correlated with Federal Reserve actions compared to nominal Treasuries.
Keywords: liquidity, Treasuries, inflation-linked bonds, COVID-19
JEL Classification: G12, G14, G18, G28, H12, H63, H84
Suggested Citation: Suggested Citation