’ t invest, and the economy suffers, resulting in lost jobs and income. 1 financial markets aren ’ t static — they evolve over time in response to changes in technology, regulation, and business models. the treasury market is not immune to this process of change. we have seen the emergence of principal trading firms, changes in regulations of key intermediaries, and the growth of nonbank financial institutions. 2 with this evolution, it is vitally important to ensure that safeguards and systems also evolve so that these markets function well in all circumstances and conditions, including unprecedented events like the pandemic. we need to reflect on and learn from these experiences and consider ways to make these and other markets more robust, thereby minimizing the potential negative consequences to the economy and the need for extraordinary policy responses. market conditions in september and march i know it might seem like a lifetime ago, but allow me take you to mid - september of last year. a number of otherwise ordinary occurrences — including corporate tax payments and settlement 1 / 4 bis central bankers'speeches of newly issued treasuries — were expected to put some upward pressure on short - term rates, but the market response was out of proportion to the magnitude of the shock. conditions in funding markets became highly volatile, with both secured and unsecured lending rates rising sharply. indeed, the size of the reaction in repo rates, the spillover to the federal funds market, and the emergence of strains in market functioning were well outside of recent experience. and the market stress was looking to get worse, not better. 3 4 in response to these developments, the federal reserve conducted a series of large - scale repo operations with the aim of calming conditions in funding markets and bringing the federal funds rate within the target range. the provision of liquidity had the desired effect of reducing strains in markets, narrowing the dispersion of rates, and keeping the federal funds rate within the target range. 5 moving to more recent events, in march of this year the global spread of the pandemic led to a rapid and massive movement of funds around the world as investors sought to protect themselves from the highly uncertain and darkening economic outlook. these flows threatened to overwhelm the financial system and resulted in intense strain and disruption in short - term funding markets and markets for treasury securities and agency mortgage - backed securities. 6 measures of market functioning deteriorated to levels near, or in some cases worse than, those we saw at the peak of the 2008

john c williams : a solution to every puzzle remarks ( via videoconference ) by mr john c williams, president and chief executive officer of the federal reserve bank of new york, at the 2020 us treasury market conference, 29 september 2020. * * * good morning, everyone, and welcome to the sixth annual u. s. treasury market conference. i wish we were able to meet in person at the new york fed. but, while the location for this year ’ s conference may have moved from an auditorium to your living room, the goal remains the same : to bring together market participants and representatives from five public sector bodies — the new york fed, the board of governors, the treasury, the sec, and the cftc. and, the events of the past year make the conversations we will have today all the more valuable and timely. today, i ’ d like to begin with stressing the importance of well - functioning financial markets and then look at two recent episodes of volatility and the lessons learned. i ’ ll close by explaining the fed ’ s role to support functioning in this critical part of the financial system. at last year ’ s conference, i spoke about the transition away from libor. because i am certain all of you have committed to memory everything i said then, i ’ ll keep my remarks on libor today short and to the point : we have only 459 days until the availability of libor can no longer be assured, and everyone needs to put their nose to the grindstone in their efforts to prepare for the move off libor. in the immortal words of captain jean luc picard — make it so! before i continue on to today ’ s topic or quote other favorite star trek characters, i need to give the standard fed disclaimer that the views i express today are mine alone and do not necessarily reflect those of the federal open market committee or others in the federal reserve system. the heart of the economy the markets that are the center of attention today — the treasury market, the repo market, and the mortgage - backed securities market — represent the heart of the circulatory system of our financial system and our economy, and indeed the global economy. when they are working smoothly, all the other parts of the system can perform as they should. but, the opposite is true as well. if these critical markets break down, credit stops flowing, and people can ’ t finance the purchase of a car or a home, businesses can