Fed's Brainard Says There's Little Evidence Bond Market Liquidity Dried Up

Federal Reserve. Gov. Lael Brainard, pushing back against common perception, said in a speech in Austria on Wednesday there is relatively little evidence of any deterioration in day-to-day liquidity in the bond market. "Traditional measures of liquidity, such as bid-asked spreads, are generally no higher than they were pre-crisis. Turnover, an alternative measure of day-to-day liquidity, is lower, but it is unclear whether this reflects changes in liquidity or perhaps changes in the composition of investors," she said. She also pointed out that reductions in broker-dealer inventory occurred prior to the passage of the Dodd-Frank Act.