The Federal Reserve’s Financial Stability Report for October 2023, published today, says very little whose significance even the usually well-informed citizen might understand. It is full of many, many charts showing financial indicators, with brief paragraphs explaining that they are “above the historical norm,” “below the norm,” “near the norm,” etc. For example, “Auto loan delinquencies remained at levels above their historical median"—meaning in the last six months of the fiscal year, April-September 2023. In fact, an Equifax survey just published showed subprime auto loan delinquency is 6.11% of all loans, higher than it has ever been since subprime loans were “invented” in the early 1990s.
But given that lulling method, one paragraph in this 70-page report sticks out: the one on low liquidity explaining high volatility in the Treasury securities market:
“Treasury market liquidity is important because of the key role these securities play in the financial system,” the paragraph reads. “Various measures of market liquidity, such as market depth, suggest that while Treasury market liquidity was largely in line with expectations [!! whose?] given interest rate volatility, it remained below historical norms (Figures 1.11 and 1.12). This low level of market depth could indicate that liquidity providers are being particularly cautious, and liquidity may be less resilient than usual.”
