US Treasury market pain amplifies worry about liquidity, spooks investors

Investors are concerned about wild price swings in the commodities markets due to the Ukraine crisis and sanctions on Russia.

A sharp sell-off in U.S. Treasuries has increased concerns about low levels of liquidity in the $23.5 trillion market, potentially amplifying losses for investors which already had a dire start to the year.

U.S. government bond yields have spiked this year as the Federal Reserve has sounded more hawkish about how aggressively it will hike interest rates to cool the economy, hitting bond returns. The ICE BofA Treasury Index has recorded its worst start to the year in history, down 6%.

While liquidity in the U.S. Treasury market has been an ongoing issue, traders and investors said there had been particular concerns