Illiquidity of off the run treasury bonds

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whatchamacallit
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Illiquidity of off the run treasury bonds

Post by whatchamacallit » Wed Jun 09, 2021 10:26 pm

I don't think I knew about the liquidity problems for selling treasury bonds into secondary market. I was just listening to this conversation about trouble in March 2020 when foreign markets were unloading treasury bonds.

https://www.youtube.com/watch?v=LaQhyd2h974


https://www.investopedia.com/terms/o/of ... suries.asp
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Xan
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Re: Illiquidity of off the run treasury bonds

Post by Xan » Wed Jun 09, 2021 10:30 pm

Liquidity problems selling treasury bonds? Yikes!
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Tortoise
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Re: Illiquidity of off the run treasury bonds

Post by Tortoise » Thu Jun 10, 2021 2:22 pm

This other Investopedia entry claims that long-term investors typically get a better deal by buying off-the-run Treasuries since they avoid paying the “liquidity premium” of on-the-run Treasuries:

https://www.investopedia.com/terms/o/on ... suries.asp

For what it’s worth, I’ve bought and sold dozens of off-the-run Treasuries over the past decade, and the trades have always executed within seconds. I didn’t encounter any liquidity issues.

In the video linked in the OP, it sounds like they’re saving the explanation of the reason behind the off-the-run Treasury liquidity problem that occurred in March 2020 until part 3.
whatchamacallit
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Re: Illiquidity of off the run treasury bonds

Post by whatchamacallit » Thu Jun 10, 2021 5:30 pm

It almost sounded like they were saying the foreign banks didn't have access to sell them into secondary market and had to sell them back to dealers.

Otherwise I would sure think there would be a price point that would create some liquidity because it was such a good deal.

I just found this paper that looks to be covering the trouble with treasury bonds in March 2020. I will have to look it over to see what they say was happening.

http://faculty.haas.berkeley.edu/vissin ... ds2020.pdf
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