Fed's Tarullo: 'Something Different' About Bond Market But Not Clear Just What

Concern about market depth and anecdotal reports of difficulty in moving large positions make it clear that there is "something different" about the bond market, but there is not yet a "precise and convincing explanation of exactly what has happened," said Federal Reserve Governor Daniel Tarullo, on Thursday. "It is an issue that everybody needs to be thinking about assessing more," especially whether it is a financial risk, Tarullo said during an appearance at the Council of Foreign Relations in New York. The sharp bond market sell-off last October 15 has gotten the attention of the Fed, he said. Many experts blame government regulations in the wake of the financial crisis for the lack of liquidity in the market. Tarullo, who is leading the Fed's regulatory efforts, said Dodd-Frank and other regulation were only one of several factors at play. He said that changes in market structure, more involvement of asset managers in the market, and high frequency trading were other factors.