A top researcher at MSCI breaks down why investors should be worried about a ‘brewing’ liquidity crisis in the Treasury market — and shares 4 investing ideas he sees gaining popularity

• Andy Sparks of MSCI says investors should be watching deteriorating liquidity in Treasurys.
• Sparks said it could hurt money managers’ returns.
• He also shared investment opportunities he sees right now.

In an environment where returns are sparse, hedges like risk-free Treasurys play an important role for money managers. 

But those hedges may now be in trouble, according to Andy Sparks, the head of portfolio management research at MSCI, a market research firm. 

That’s because liquidity in the Treasury market is drying up and is now near levels seen at the height of the COVID-19 shock in financial markets, when bid-ask spreads jumped, prices became more impacted by trades, and price volatility rose. Liquidity refers to how easy it is to get into and out of an investment.