Treasuries Market Flashes Red, Fed Unleashes Tsunami

In a follow-up blog, we will dive deeper into the underlying workings and function of the short-term funding markets. In liquidity events, cracks always show up first in the funding markets and typically ripple through the entire financial system. Exhibits 5 and 6 show the recent spike in option-adjusted spreads (i.e., perceived risk) in the S&P U.S. Dollar Global Investment Grade Corporate Bond Index and the S&P U.S. Dollar Global High Yield Corporate Bond Index.

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