Check the financial plumbing, this is where the worry should be centered

Watch the plumbing and not the liquidity. It is the flow of capital and funding not the stock that matters. There can be a liquidity crisis which requires cash, but the stress resides in the movement around and through a complex system.  Complex systems such as the short-term macro financing apparatus are sensitive to breakage when volatility is high and time for repair is short. One markets problem will spillover and contaminate other markets. Margins are being raised, new collateral is required, and funding is needed to allow markets to function. This is not a pricing problem but the ability to meet funding obligations to continue market functions.

If the structure has barriers for the free flow of capital, then pricing will deviate from fair value and financial signaling is diminished. Relative value trades and risk management can be properly implemented if pricing is not representative of true value. 

Our check of liquidity and funding stress spreads show the worst plumbing issues since the Financial Crisis (FC); however, the Fed stress indices through March 13 have spiked and are heightened, but still below 2015-16 levels. We expect these numbers to spike further. Unfortunately, the composition of these indices often does not measure key stress issues.