Primary dealers are providing less and less liquidity in the Treasury market as their ability to use repo has shrunk due to tighter regulation and higher balance sheet costs.

An incredibly important chart.

Primary dealers are providing less and less liquidity in the Treasury market as their ability to use repo has shrunk due to tighter regulation and higher balance sheet costs.

Less structural liquidity makes the UST market more prone to big swings. pic.twitter.com/top1Q8c26A

— Alf (@MacroAlf) April 17, 2022

Long-maturity Treasuries are contending with their biggest drawdown on record t.co/5vvFs1BVaL

— Win Smart, CFA (@WinfieldSmart) April 18, 2022

Surge in mortgage rates continues unabated … 30y average rate has increased over past year at fastest pace since early-to-mid-1990s pic.twitter.com/2fjmYrp0Dy

— Liz Ann Sonders (@LizAnnSonders) April 18, 2022

Bond Rout Promises More Pain for Investors

The worst bond rout in decades shows few signs of abating, threatening further pain for both investors and borrowers.

Rising Treasury yields are in many ways a reflection of a robust economy. A big reason why many investors expect continued high inflation in the near term is that households are flush with cash and eager to spend their money on travel and leisure activities as they begin to worry less about the Covid-19 pandemic. The labor market is also, by some measures, the tightest in decades, giving workers leverage to demand better wages and confidence that they can always find a different job if they lose their current one.