By Michael S. Derby
NEW YORK Federal Reserve Bank of New York President John Williams said Thursday good data is key for market participants, central banks and regulators, and more should be done to increase its availability.
“Having access to an abundance of data is a wonderful problem to have,” Williams said. “It’s important that we continue to prioritize transparency and clarity in data, especially financial market data. This is particularly true in the age of AI, when the sources of data are harder to trace.”
Williams, whose comments came from a text prepared for delivery before an event at his bank on the Treasury market, did not comment on the monetary policy outlook.
Williams also noted that data can be misused, noting that during the recent inflation surge many have referred to market-based price pressure measures based on inflation option pricing.
“Based on our market contacts and public reporting of derivatives transactions, these aren’t data at all. There have been no trades reported in the U.S. inflation options market since early 2021,” and what has been quoted has been based on models rather than actual real-world trading.
In separate comments for the conference, Michelle Neal, who leads the bank’s Markets Group, also touted the need for more transparency in the bond market.
“I am looking forward to the increased transparency in on-the-run transaction data” industry participants are working toward, Neal said. “Looking further ahead, we should consider whether to take additional steps toward increased transaction transparency across the Treasury universe, especially for the less liquid segments of the Treasury market, such as the off-the-run market, where transparency is currently limited.”
Neal noted that the off-the-run section of the Treasury market was where market issues were concentrated in March 2020, as the coronavirus pandemic sent investors thundering toward cash, upending market functioning. Even now, “there is little data on off-the-run trading available to the public, making it challenging for academics and others to study such stress events in detail,” Neal noted.
(Reporting by Michael S. Derby; Editing by Chizu Nomiyama)
