Release of Joint Staff Report on October 15, 2014

Staff from the U.S. Department of Treasury, the Board of Governors of the Federal Reserve System, the Federal Reserve Bank of New York, the U.S. Securities and Exchange Commission, and the U.S. Commodity Futures Trading Commission today issued a joint report analyzing the significant volatility in the U.S. Treasury market on October 15, 2014.  Using non-public data from the U.S. Treasury cash and futures markets, the joint report provides detailed analysis of the market conditions and record trading volumes that day, including an unusually rapid round trip in prices and deterioration in liquidity during a narrow window. 

The joint report makes clear that a number of developments help explain the conditions that likely contributed to the volatility.  Specifically, the report finds that in addition to other factors, changes in global risk sentiment and investor positions, a decline in order book depth, and changes in order flow and liquidity provision together provide important insight into the developments that day.  The report also underscores the changing structure of the U.S. Treasury market, the deepest and most liquid government securities market in the world.

Finally, the report also offers several next steps to further enhance the public and private sectors’ understanding of changes to the structure of the U.S. Treasury market and their implications.  The report recommends continued analysis of U.S. Treasury market structure and functioning, focusing on trading and risk management practices, the availability of public data, and continued efforts to strengthen monitoring and inter-agency coordination related to trading across the U.S. Treasury cash and futures markets.