(Bloomberg) The $13.9 trillion market for U.S. Treasuries is often called the most important in the world. Lawmakers, regulators and investors have always taken its smooth functioning for granted, with rare exceptions such as the bidding scandal that almost sunk Salomon Brothers in the early 1990s. Liquidity, or the ability to buy or sell at a moment’s notice, was unquestioned.
All that changed one morning in October 2014 with a dramatic “flash crash” in yields. Rates on 10-year notes ripped sharply lower with no obvious trigger, only to scream back higher in a gut-wrenching 37-basis-point range.