In some way connected to my previous posts on the effects of recent market volatility on Fixed Income e-Trading and Hedge Funds on MTS, Bloomberg have a piece today stating that US Tresury volatility is at 3-year highs.

“The retreat by so-called black-box traders and hedge funds caused orders for Treasuries to drop as much as 80 percent, said Mark Ficke, senior managing director at ESpeed Inc., the second- biggest interdealer broker.”

Now they measure liquidity here in terms of size, normal order size of $500m is now $100m in 2-year notes. However, it looks like my view that market volatility should mean increased volumes may not ring true on eSpeed in the States…….but the article mentions that Fed data indicates August averaged $767 bn a day in trading, a record. Then a trader from Mizuho in The States screams “I JUST WANT LIQUIDITY WITH MY VOLATILITY!”.

So volatility is high, volumes are high (so I was right, just eSpeed is down due to algo seizure) but liquidity is low.