depth for the on - therun 10 - year treasury security dropped to about 10 percent of its previous level, and daily volumes spiked to more than $ 1. 2 trillion at one point, roughly four standard deviations above the 2019 average daily trading volume. stresses were also evident in a breakdown of the usually tight link between treasury cash and futures prices, with the treasury cash – futures basis — the difference between prices of treasury futures contracts and prices of treasury cash securities eligible for delivery into those futures contracts — widening notably. selling pressures were widespread, reflecting sales by foreign official institutions, rebalancing by asset managers, a rapid unwinding of levered positions, and precautionary liquidity raising. available data suggest that foreign institutions liquidated about $ 400 billion in treasury securities in march, with more than half from official institutions and the remainder from private foreign investors, at a time when offshore dollar funding markets also experienced acute stress. domestic mutual funds sold about $ 200 billion during the first quarter, selling their - 6less - liquid treasury securities in order to raise cash to meet investor redemptions. hedge funds reduced long cash treasury positions by an estimated $ 35 billion. 6 dealers play a central role in the treasury market by buying and selling securities and providing financing to investors. their capacity or willingness to intermediate these flows was strained amid the elevated uncertainty and intense and widespread selling pressure in midmarch. operational adjustments associated with the rapid move to remote work may also have inhibited intermediation. the acute stresses in the treasury market necessitated emergency intervention by the federal reserve at an unprecedented scale. the federal open market committee authorized purchases of treasury securities and agency mortgage - backed securities ( mbs ) “ in the amounts needed ” to support smooth market functioning of these markets. 7 between march 12 and april 15, the federal reserve increased its holdings of treasury securities by about $ 1. 2 trillion and agency mbs by about $ 200 billion. the federal reserve provided overnight and term repurchase agreement ( repo ) operations to address disruptions in treasury financing markets. these actions rapidly restored market functioning, and a variety of indicators had returned to pre - covid levels by the summer. 8 while the scale and speed of flows associated with the covid shock are likely pretty far out in the tail of the probability distribution, the crisis highlighted vulnerabilities in the critically important treasury market that warrant careful analysis. a number of possible reforms have see board of governors of the federal reserve system ( 2020 )

resolved. more worrisome are the longer - term uncertainties that in recent years have been boosting prices in distant futures markets for oil. between 1990 and 2000, although spot crude oil prices ranged between $ 11 and $ 40 per barrel for wti crude, distant futures exhibited little variation around $ 20 per barrel. the presumption was that temporary increases in demand or shortfalls of supply would lead producers, with sufficient time to seek, discover, drill, and lift oil, or expand reservoir recovery from existing fields, to raise output by enough to eventually cause prices to fall back to the presumed long - term marginal cost of extracting oil. even an increasingly inhospitable and costly exploratory environment - an environment that reflects more than a century of draining the more immediately accessible sources of crude oil - did not seem to weigh significantly on distant price prospects. such long - term price tranquility has faded dramatically over the past four years. prices for delivery in 2010 of light, low - sulphur crude rose to more than $ 35 per barrel when spot prices touched near $ 49 per barrel in late august. rising geopolitical concerns about insecure reserves and the lack of investment to exploit them appear to be the key sources of upward pressure on distant future prices. however, the most recent runup in spot prices to nearly $ 55 per barrel, attributed largely to the destructive effects of hurricane ivan, left the price for delivery in 2010 barely above its august high. this suggests that part of the recent rise in spot prices is expected to wash out over the longer run. should future balances between supply and demand remain precarious, incentives for oil consumers in developed countries to decrease the oil intensity of their economies will doubtless continue. presumably, similar developments will emerge in the large oil - consuming developing economies. elevated long - term oil futures prices, if sustained at current levels or higher, would no doubt alter the extent of, and manner in which, the world consumes oil. much of the capital infrastructure of the united states and elsewhere was built in anticipation of lower real oil prices than currently prevail or are anticipated for the future. unless oil prices fall back, some of the more oil - intensive parts of our capital stock would lose part of their competitive edge and presumably be displaced, as was the case following the price increases of the late 1970s. those prices reduced the subsequent oil intensity of the u. s. economy by almost half. much of the oil displacement