In one of the most sophisticated markets in the world, 75 percent of the market-making in U.S. Treasuries is done by algorithmic trading. As volatility surged and risk increased, the algorithms automatically reduced the size of the positions they would take. At the same time, they hiked the spread between prices at which they would buy and sell bonds. This was programmed into the algorithms because it was a sensible reaction to a turbulent market that had taken a turn to the downside. It was destabilizing because it applied a squeeze to another key node in the fragile system of market-based
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