J.P.Morgan Flag Continued Deterioration in Liquidity

J.P.Morgan note that “10-Year market depth declined further today, bringing the 5-day average to the lowest level since early March 2021. Moreover, the RMSE of our Treasury par curve has continued to drift higher, matching the recent highs from December when the talk of an accelerated taper hampered liquidity conditions in off-the-run Treasuries, moving very close to the highest levels observed in March 2020. GC repo has cheapened modestly relative to matched-maturity OIS, and this spread is approaching its widest levels of the past year, but remains well below the crisis wides observed in the spring of 2020. Finally, on-the-runs modestly outperformed near-off-the-runs today, and there is little indication of increased liquidity preference in these spreads.”