Fed's Barr: I'm 'quite attentive' to liquidity issues in Treasury market

Federal Reserve Vice Chair of Supervision Michael Barr said Wednesday that he's paying close attention to growing concerns about liquidity issues surrounding the Treasury market, which has historically been regarded as extremely safe and liquid. "The Treasury market is experiencing higher levels of volatility," Barr said in response to a question during an appearance before the Committee on Financial Services. "That volatility leads to lower levels of liquidity, which we're also seeing in Treasury and other markets." In an effort to mitigate those issues, Barr said that the Fed has "put in place a "backstop facility for repo transactions" as well as a "backstop for foreign official repo transactions." he added that the Fed is currently monitoring a number of capital requirements, such as the enhanced supplementary leverage ratio, to see how they work together. Of note, Treasury yields ( US10Y ) ( US5Y ) ( US2Y ) ( US30Y ) ( US3M ) have soared to the highest levels since the 2008 Great Financial Crisis as the U.S. central bank embraces its most aggressive rate-hiking cycle since the 1980s in the wake of stubbornly high inflation. Bearing in mind the inverse relationship of yields and bonds, Treasury bonds ( NASDAQ: TLT ) ( NYSEARCA: ZROZ ) have suffered one of the worst drawdowns on record. Nevertheless, Barr reassured that "the Treasury market is resilient and robust." Elsewhere, Barr pointed out that it's important to have robust oversight of stablecoins, or digital representations of more "stable" assets such as the U.S. dollar ( DXY ). He described stablecoins as "a form of private money," which "can generate significant run risks and financial stability risks if not strongly and appropriately regulated." In September, Barr mapped out his priorities to make financial system safer and fairer .