NEW YORK (Reuters) - The Federal Reserve is aware that many bond market investors are concerned about a perceived drop in bond market liquidity, a Fed policymakers said on Tuesday, adding that some potential reforms could improve the situation.
Fed governor Jerome Powell said the actual depth of any reduction in liquidity remains unclear, but it is important for regulators like the Fed to be sure that bond markets function well for the sake of a world financial system that relies on U.S. Treasury securities as an important safe investment.
“Most market participants perceive some reduction in liquidity,” Powell said in prepared remarks to a conference on the structure of the U.S. Treasury market. “Views on the severity of the situation seem to be more mixed.”
Reporting by Jonathan Spicer; Additional reporting by Jason Lange and Howard Schneider in Washington; Editing by Chizu Nomiyama