US Treasury market holds its breath after high drama

Intermediation broke down after off-the-run bonds were dumped on banks

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The US Treasuries market was brought to its knees on March 12 as banks struggled to handle a wave of selling from clients. Amid reports that asset managers were dumping bonds cheaply in a desperate search for cash – and rumours of a major liquidation of futures versus cash bond positions – the Federal Reserve Bank of New York sought to restore order, making $1.5 trillion in term repo available before the end of the week.

The intervention brought some relief but liquidity was “still terrible” at