A Riddle Wrapped in a Price Swing: ‘Weird Stuff Happens’ in Treasuries

On Oct. 15, 2014, officials at the U.S. Department of the Treasury were spooked by a burst of rapid-fire trading in the $13 trillion market for U.S. government debt. Over a 12-minute span that morning, the yield on the benchmark 10-year Treasury note plunged from 2.02 percent to 1.86 percent, then just as quickly shot back up to within a few ticks of where it started.

The nosedive and rapid recovery were a rare episode of volatility for the Treasury market, which helps finance the U.S. government and, with $500 billion in securities traded every day, is the largest and most active debt market in the world. Treasury yields have fluctuated that much only three other times since 1998, including the day central banks announced a coordinated cut in global interest rates during the height of the financial crisis in October 2008 and in August 2011, when Standard & Poor’s lowered its credit rating on the U.S. This time, there was no apparent cause, leaving bankers, traders, and regulators mystified. Jamie Dimon, chief executive officer of JPMorgan Chase, called it “an event that is supposed to happen only once in every 3 billion years or so.”