The market for US Treasury bonds operates just fine, right up until the moment that the thing that keeps it moving suddenly disappears.

That is the gist of a new post published by the The Federal Reserve Bank of New York's Liberty Street Economics blog published this morning on the hot-button issue in the bond market.

The post, which is the first of a series, examines whether there is an evidence of a sustained deterioration in liquidity in the biggest bond market in the world.

Everyone from JPMorgan chief Jamie Dimon to Blackstone billionaire Steve Schwarzman to bond guru Bill Gross has sounded the alarm over reduced liquidity.

The fear is that in a volatile market investors may not be able to sell bonds, pushing prices down further and sending yields spiraling upwards.

The authors of the post found, however, that by most metrics liquidity hasn't really deteriorated. Bid-ask spreads suggest ample liquidity, for example. There is a similar story for order book depth, or the amount of securities available at the best bid and offer prices, and the estimated price impact of buying and selling large positions in bonds.

Bond market depth Liberty Street Economics

However, the key issue is what happens when these market conditions suddenly change, as they did during the taper tantrum in 2013, and during the October 15 2014 flash crash. Treasury counselor Antonio Weiss recently said that the US Treasury had been unable to identify a single cause for the crash and that it could happen again.

The authors allude to this, saying that while average liquidity seems to be fine, there might be increased liquidity risk. That means there is an increased risk that liquidity will evaporate, leaving bond market players unable to shift positions.

Indeed the wild bond market swing on October 15 and similar episodes of sharp, seemingly unexplained price changes in the dollar-euro and German Bund markets have heightened worry about tail events in which liquidity suddenly evaporates."

The Liberty Street Economics blog promises another post on what it calls illiquidity risk in a future post.

Watch this space.